Kellanova (K) stock is trading notably higher Wednesday on news Mars, the parent company of M&M’s and Snickers, will acquire the snack maker whose brands include Cheez-It and Pringles in an all-cash deal valued at $35.9 billion, including debt.
This works out to $83.50 per K share, a 12% premium to the stock's August 13 close at $74.50.
"In welcoming Kellanova's portfolio of growing global brands, we have a substantial opportunity for Mars to further develop a sustainable snacking business that is fit for the future," said Poul Weihrauch, CEO of Mars, in a statement.
Kellanova was spun off from Kellogg last year. In its latest earnings release, the company's revenue declined 4.7% year-over-year to $3.2 billion while its earnings per share increased 12.2% from the year-ago period to $1.01.
Mars is one of the largest private companies in the United States and is a global manufacturer of confectionery, food and pet food products. Its most popular brands include M&M’s, Snickers, Skittles and Wrigley's.
"We believe a transaction would further validate the power of Kellanova's brands and growth potential, both in North America and internationally," wrote Stifel analyst Matthew Smith. "The transaction would be the largest packaged foods transaction since the Kraft-Heinz merger."
Smith added that the pipeline for potential mergers and acquisitions of packaged food businesses is very full.
What does this mean for Kellanova investors?
According to the terms of the agreement, Kellanova shareholders will receive $83.50 in cash for each share they currently own. While the deal has already been approved by Kellanova's board of directors, it will still need shareholder approval. If you own K stock and have any questions, you can reach out to your broker.
Heading into today's session, Kellanova was up nearly 36% for the year to date on a total return basis (price change plus dividends). Yet, Wall Street is on the sidelines when it comes to the consumer staples stock.
According to S&P Global Market Intelligence, the average analyst target price for K stock is $71.57, representing a discount to current levels. Additionally, the consensus recommendation is a Hold.
