Italian confectioner Ferrero, recognized for manufacturers like Nutella and Kinder, is shopping for the century-old U.S. cereal firm WK Kellogg in an effort to increase its North American gross sales.
The Ferrero Group stated Thursday it’ll pay $23 for every Kellogg share, or roughly $3.1 billion. The transaction consists of WK Kellogg Co.’s six manufacturing crops, and the advertising and distribution of its breakfast cereals throughout the USA, Canada and the Caribbean.
WK Kellogg’s shares have been up 31% in early afternoon buying and selling Thursday.
Kellogg was based in Battle Creek, Michigan, in 1906 after its founder by accident discovered how you can make flaked cereal whereas he was experimenting with granola. Kellogg nonetheless makes Corn Flakes, in addition to Froot Loops, Particular Okay, Frosted Flakes, Rice Krispies and different cereals.
Kellogg now has 4 U.S. crops, that are situated in Michigan, Pennsylvania, Tennessee and Nebraska. It additionally has a plant in Mexico and a plant in Canada. The corporate has round 3,000 staff.
The present firm was shaped in 2023, when Kellogg snack manufacturers like Cheez-Its and Pringles have been spun right into a separate firm known as Kellanova. M&M’s maker Mars Inc. introduced final 12 months that it deliberate to purchase Kellanova in a deal value practically $30 billion.
Ferrero Group, which was based in Italy in 1946, has been making an attempt to increase its U.S. footprint. In 2018 it purchased Nestle’s U.S. sweet manufacturers, together with Butterfinger, Nerds and SweeTarts. And in 2022 it purchased Wells Enterprises, the maker of ice cream manufacturers like Blue Bunny and Halo High.
WK Kellogg’s manufacturers have been fighting a long-term decline in U.S. cereal consumption as shoppers turned to protein bars, shakes and different breakfast gadgets. Cereal gross sales bought a bump throughout the coronavirus pandemic as extra households stayed house, however gross sales continued to say no after the pandemic eased.
Initially of July, U.S. chilly cereal gross sales have been down 6% in comparison with the identical interval in 2022, based on market analysis firm Nielsen IQ. Kellogg’s internet gross sales fell 2% to $2.7 billion in 2024.
Brad Haller, a senior associate for mergers and acquisitions at West Monroe, stated Kellogg’s massive distribution community and relationships with grocery chains in North America is interesting to Ferrero as a result of it might assist the European firm negotiate pricing and positioning for its merchandise.
The acquisition additionally helps Ferraro increase past snacks and sweets and right into a meal class, Haller stated. However the firm additionally could wind up slicing Kellogg manufacturers or shutting down manufacturing crops.
“As Individuals, these manufacturers are iconic and beloved by us, however a European firm shopping for these wouldn’t have the identical nostalgia,” Haller stated.
Kellogg has had different points. A virtually three-month strike by employees in any respect its U.S. cereal crops in late 2021 harm gross sales. And final fall, dozens of individuals rallied exterior the corporate’s Battle Creek headquarters demanding that Kellogg take away synthetic dyes from its cereals.
Earlier this 12 months, Kellogg stated it was reformulating cereals bought to colleges to take away synthetic dyes and won’t embody them in any new merchandise beginning in January.
Ferrero’s acquisition, which nonetheless wants approval from Kellogg shareholders, is anticipated to shut within the second half of the 12 months. As soon as the transaction is full, Kellogg’s inventory will not commerce on the New York Inventory Alternate and the corporate will develop into a Ferrero subsidiary.