WK Kellogg has agreed to be bought by the owner of Ferrero Rocher in a deal worth about $3.1bn (R55.59bn), uniting two of the world’s most recognisable consumer brands to weather a tough spending backdrop marked by persistent inflation.
Deal making in the snacking space has picked up pace as food brands battle with muted sales in the wake of price hikes, owing to higher input costs, and a shift in consumer preference for healthier options. Kellanova, which was created at the same time as WK Kellogg when Kellogg Co split into two, is also in the process of being acquired by candy giant Mars in a nearly $36bn (R645.55bn) deal.
Shares of WK Kellogg jumped 30.6% at $22.85 in midday trading on Thursday when the deal was announced, nearly matching the premium that Ferrero's $23 per share deal represented. The acquisition, Ferrero’s biggest since 2018, will bring legacy brands such as Nutella, Kinder, Tic Tac, Frosted Flakes, Froot Loops and Special K under one roof when the transaction closes, which is expected later this year.
[The acquisition gives Ferrero] instant US distribution, shelf space, and a brand portfolio ... in a lucrative market that it can drizzle with innovation at a relatively good price
— Michael Ashley Schulman, chief investment officer of Running Point Capital Advisor
The acquisition allows Ferrero to diversify from its cocoa-heavy portfolio and gives it “instant US distribution, shelf space and a brand portfolio ... in a lucrative market that it can drizzle with innovation at a relatively good price”, Michael Ashley Schulman, chief investment officer of Running Point Capital Advisors, said.
Strong demand and strained supply pushed cocoa prices to a record high last year, sparking concerns among companies that use the chocolate-making ingredient for packaged food items. Several US packaged food companies, including JM Smucker, Kraft Heinz and PepsiCo, have also been hit by uncertainties sparked by President Donald Trump’s erratic trade policy.
More recently, they came under pressure from health secretary Robert F Kennedy Jnr’s Make America Healthy Again Commission to eliminate the use of synthetic dyes.
Ferrero, the maker of Nutella hazelnut spread, has turned into a global group, boosted by the aggressive acquisition campaign launched by its executive chair, Giovanni Ferrero. In 2018, Ferrero bought Nestle’s US confectionery business for $2.8bn (R50.21bn). The group reported turnover of $19.2bn (R344.29bn) in financial 2024 and said it had increased its investments to boost manufacturing capabilities and expand across categories.
Reuters
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