Mars’ $36B takeover of Kellanova delayed amid EU investigation

Dive Brief:

• Mars’ $36 billion cash takeover of Pringles maker Kellanova will be delayed after the European Union announced an in-depth investigation into the merger. Mars said it expected the deal will now close toward the end of 2025.
• The European Commission, the E.U.’s antitrust regulator, warned in a preliminary investigation that the deal would increase Mars’ product portfolio and could give it greater bargaining power with retailers. As a result, Mars could use that leverage to extract higher prices from retailers, which would then be passed on to consumers.
• The transaction, which would give the M&M maker ownership of Cheez-It, Pringles and other snacks, was announced last August and initially projected to close in the first half of 2025. The commission has until Oct. 31 to conduct its investigation and make a decision.

Dive Insight:

In a food space where mega-mergers have all but disappeared, the Mars-Kellanova tie-up proved to be a major exception when it was first announced last August. Now, regulators in the E.U. are expressing “serious doubts” about the deal. 

The European Commission warned that the combined company would have a strong market position in parts of the E.U., adding that several retailers have expressed concern about Mars’ increased bargaining power should it add “Kellanova’s must-have brands to its existing portfolio.”

“As inflation-hit food prices remain high across Europe, it is essential to ensure that this acquisition does not further drive up the cost of shopping baskets,” Teresa Ribera, executive vice-president for clean, just and competitive transition, said in a statement. “Our in-depth investigation will assess the transaction’s impact on the price of these companies’ products for consumers.” 

In a statement, Mars said it remains confident in the merger, which it said“will deliver more choice and innovation to consumers.”

“We are disappointed yet remain optimistic that this investigation will be positively resolved.”

The review investigation came on the same day as the Federal Trade Commission in the U.S. determined the deal was not anticompetitive. 

“Our job is to protect competition and consumers in the United States. Our job is to determine whether there is a violation of American law that we can prove in court,”  said Daniel Guarnera, the FTC’s director of the bureau of competition, said in a statement. “And once we’ve concluded there is not, our job is to get out of the way.” 

The transaction has been cleared by 27 of the 28 needed entities, with only the review by the European Commission outstanding, according to Mars.

A combined Mars-Kellanova would have more than $63 billion in net sales and 17 brands worth more than $1 billion, the companies said when the combination was announced.

It would also give the 114-year-old Mars a deeper presence in the fast-growing salty snacks space to complement its exposure in sweets and confectionery, categories that have underperformed as consumers look for healthier options with greater value. Mars would also benefit from Kellanova’s greater exposure in parts of the world where it isn’t as dominant, such as Africa.