Kellanova shares soar as Mars weighs deal for snackmaker

The stock has gained 13% this year, valuing the company at $21.6bn (€19.7bn).

Kellanova shares have shot up with Mars considering buying the snackmaker in what could be one of the biggest deals this year. Talks are ongoing.

Kellanova shares jumped 22% in pre-market trading. The stock has gained 13% this year, valuing the company at $21.6bn (€19.7bn). A deal could value Kellanova at around $30bn (€27.3bn), the Wall Street Journal reported earlier.

An acquisition of Kellanova, which was spun off from Kellogg's last year, would give privately owned Mars a greater variety of food labels — including Pringles, Cheez-It, and Pop-Tarts. It would also help Mars scale in international markets.

The potential tie-up could help the company fight back against declining volumes, slowing growth, and weakening global consumer. With inflation subsiding, companies that raised prices during the pandemic are finding it harder to cover declining purchases, with higher prices, and are looking to cut costs.

“The merger could usher in another cycle of consolidation in the packaged-foods space similar to 1999-2001, thus providing a boost to valuations,” said TD Cowen analyst Robert Moskow.

At times like this, when growth slows, balance sheets are relatively clean, and valuations dip, the market leaders in food tend to look more closely at big combinations to drive cost synergies

Kellogg's split its snacks business last year from its North American cereal operations, which includes Special K and Corn Flakes. 

Kellanova has had a string of strong earnings since and recently raised its guidance for the full year. 

It beat Wall Street’s expectations for sales in the second quarter, partially due to strength in North America, where sales and volume grew. 

That bucked a trend at the likes of PepsiCo and Kraft Heinz, which reported lower volumes as consumers purchase fewer snacks after years of rising prices.

• Bloomberg