Mars' mulled deal for Kellanova should withstand regulatory scrutiny
By Abigail Summerville
Aug 7 (Reuters) -Mars' contemplated acquisition of U.S. snack maker Kellanova KHC.O stands a good chance of getting past global antitrust regulators, legal experts say, even as it touches on a sensitive area of government oversight -- how much consumers pay for food.
Reuters reported on Sunday that privately held Mars was looking to acquire Kellanova, which has a market value including debt of $31 billion. The tie-up would come as other deals in the food sector, such as grocery store operator Kroger's KR.N $25 billion proposed acquisition of Albertsons ACI.N, grapple with lawsuits from regulators over the impact they would have on prices following a bout of inflation.
These concerns are acute in the packaged food sector, which lower-income families have traditionally relied on because fresh food can be more expensive. The industry has hit shoppers with higher prices in the last two years, citing higher costs that started with the COVID-19 pandemic and were exacerbated by Russia's invasion of Ukraine.
If U.S. regulators do decide to challenge the deal, they may struggle to convince antitrust judges that uniting Mars, maker of Snickers, M&M's, Pop-Tarts and Rice Krispies Treats, with Kellanova, producer of Pringles, Cheez-It, Pop-Tarts and Eggo frozen waffles, would raise prices or harm competition in the market, according to interviews with and notes from six antitrust lawyers and industry analysts.
This is because of the limited overlap between their offerings.
Mars' portfolio, whichincludes Twix, Bounty and Milky Way, centers on candy and sweets, such as chocolate. The company is also the world's largest pet food maker and a major operator of veterinary health centers.
Kellanova, which split from WK Kellogg Co KLG.N last October, is rooted in a salty snacks business in the U.S. and around the world, and selling cereal outside of North America. WK Kellogg was left with the North American cereal business of Kellogg, the original parent company.
Salty snacks generate about 49% of Kellanova's annual sales, according to data provider Numerator. Mars' snacking division, which comprises chocolate, candy, gum and bars, accounts for around 38% of its annual sales, according to a person familiar with the matter.
Combined, Mars and Kellanova would account for roughly 12% of the U.S. snacking and candy industry, according to market share data from NielsenIQ. This would still leave the market with fierce competition, as PepsiCo PEP.O, Kraft Heinz KHC.O, Mondelez MDLZ.O, Hershey HSY.N, General Mills GIS.N and other big players fight for consumer dollars.
"Even when we broaden out the overlap to be total snacks together, we don't see a Mars-Kellanova deal setting off many alarm bells in the Department of Justice or Federal Trade Commission," JPMorgan analysts wrote in a note this week, referring to the two principal U.S. antitrust regulators.
Mars and Kellanova declined to comment. Spokespeople for the U.S. Department of Justice and the U.S. Federal Trade Commission (FTC)also declined to comment.
Internationally, the deal would be subject to regulatory reviews in the countries where the companies operate. Mars would also likely argue to regulators in those countries its product overlap with Kellanova is limited, the experts said.
LENGTHY REVIEW LIKELY
Gerald Stein, an antitrust partner at law firm Davis Wright Tremaine, cautioned that Mars and Kellanova should still brace themselves for lengthy regulatory review. One recent example in the food sector is Campbell Soup's CPB.N $2.33 billion acquisition of Sovos, maker of the Rao's Homemade pasta sauce.
Campbell Soup and Sovos planned to complete the deal in December but pushed the close back to March because of a protracted review by the FTC studying the overlap in their offerings.
"The lines aren't as clearly drawn as with cars, BMWs versus Kias, where you have luxury versus non-luxury products. For snack foods, it is a hard demographic to parse out," said Stein.
Another caveat, antitrust experts say, is hostility that antitrust regulators have occasionally shown for big companies merging even when their markets are fragmented and teeming with competition. They point to antitrust challenges against the proposed tie-up between handbag makers Tapestry TPR.N and Capri CPRI.N and mattress maker Tempur Sealy's proposedacquisition of Mattress Firm as recent examples.
"There is significant risk that just because these companies are so large and leaders in their segments, they will attract regulatory scrutiny," said Seth Bloom, a former general counsel of the U.S. Senate antitrust subcommittee who now runs his own advisory firm.
Reporting by Abigail Summerville in New York
Editing by Anirban Sen and David Gregorio
면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.
온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.
이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.
