Ferrero acquires Kellogg's cereals: a $3 billion deal

Ferrero , the family-owned Italian food group that produces Ferrero Rocher, TicTac, and Kinder sweets, is in advanced talks to acquire American breakfast cereal maker W.K. Kellogg in a deal valued at $3 billion , the Financial Times reports, after the Wall Street Journal first broke the story last night. The acquisition could be announced as early as this week and values ​​the maker of Kellogg 's Corn Flakes, Rice Krispies, and Froot Loops at a significant premium to its market value of $1.5 billion , two sources familiar with the matter said. There's no guarantee the deal has been finalized, and the timing could be subject to delays, they added.

This comes at a time when the food industry is grappling with changing consumer habits, where the trend toward healthier options, driven in part by the boom in the use of weight-loss drugs, has forced manufacturers, particularly confectionery companies, to adjust their strategies. The FT reports that W.K. Kellogg and Ferrero did not immediately respond to requests for comment. W.K. Kellogg was spun off as a company specializing in Kellanova and retained snack brands such as Pop-Tarts and Pringles . Food giant Mars agreed to acquire Kellanova for North America last year from parent company Kellogg Co. , which changed its name in a $36 billion deal that is now facing antitrust scrutiny from European regulators . W.K. Kellogg 's fortunes as an independent company have been disappointing.

How the US Food Market Has Changed: Kellogg's Difficulties

Its shares have underperformed the broader market since the spinoff in 2023. It also had $569 million in net debt as of March this year. Organic net sales at the Battle Creek , Michigan -based company fell 5.6% year-over-year in the first quarter to $667 million , while net income plunged 45.5% to $18 million . Shares jumped more than 50% in after-hours trading after the Wall Street Journal published reports of the deal negotiations. The potential transatlantic alliance brings together two brands with rich histories. The company's founder, Will Keith Kellogg , invented his cornflakes in 1894 , laying the foundation for what would become a cereal empire. Ferrero was founded in 1946 by Italian pastry chef Pietro Ferrero . The company is still owned by the Ferrero family, and grandson Giovanni Ferrero serves as executive chairman.

The history of Kellogg and Ferrero

Kellogg 's largest shareholder is the W.K. Kellogg Foundation , a charitable organization with about 16% of the outstanding shares. Ferrero , which generated revenue of €18.4 billion in the 12 months to the end of August last year, is pushing to expand in the United States , according to TD Cowen analyst Robert Moskow . This has also been achieved through acquisitions: the purchase of ice cream maker Well Enterprises in 2022 , Nestlé 's confectionery business for $2.8 billion in 2018 , and chocolate maker Fannie May in 2017. The food industry is also coming under political pressure with the appointment of Robert F. Kennedy Jr. as the top U.S. health official, who has targeted artificial colors in brands like Froot Loops as part of his “ Make America Healthy Again ” agenda.

The various brands and the many companies

Kellogg's has pledged to remove synthetic dyes from school cereals by the 2026-27 school year , but has not yet set a deadline for out-of-school cereal consumption. Several food groups have struck deals in the past year, driven in part by the need to adapt to changing consumer habits. Last year, beverage giant Pepsi acquired Poppi , a fast-growing prebiotic soda brand, in a $1.95 billion deal, and Siete Foods , a healthy Mexican-themed snack brand, in a $1.2 billion deal. Post Holdings , a competing cereal maker, acquired food company 8th Avenue in an $880 million deal last month.

FROM

Web Editorial Staff