Mars' biggest deal clinched by secretive, deep-pocketed family
Refiles to add missing word in paragraph 4
By Abigail Summerville
MCLEAN, VIRGINIA, Aug 14 (Reuters) -A running joke among residents of McLean, Virginia is that the most secretive organization headquartered in their Washington D.C. suburb is not the Central Intelligence Agency, but rather a confectionery and pet products company.
Here, the second-richest U.S. family runs Mars Inc, maker of M&M's candies and Pedigree pet food, out of a nondescript building with no corporate logo or any other identifying signage. The CIA's offices, on the other hand, even have a parkway exit sign.
Forbes pegs the net worth of the Mars family members at $117 billion, exceeded in the United States only by the Walton family's wealth, estimated at $267 billion. The Waltons own the ubiquitous Walmart WMT.N chain of stores.
The vast majority of the Mars family fortune is derived from the eponymous company, one of the few conglomerates to have snubbed a stock market listing in favor of secrecy. The company says this allows it to make decisions for the long term without worrying about investors scrutinizing its earnings every quarter.
Being privately held also means that, should a major acquisition sour, Mars is not under stock market pressure to take a writedown, giving it more appetite for risk, interviews with more than a dozen people familiar with its strategy show.
The interviews with these people, who requested anonymity because of confidentiality restrictions they are under, shed light on how Mars, flush with cash and dominant in the food categories it is active in, decided to place its biggest ever bet on expansion -- the $36 billion acquisition of snack and cereal maker Kellanova K.N it announced on Wednesday.
Spokespeople for Mars and Kellanova declined to comment on the details of their negotiations.
The deal is the culmination of a flurry of Mars' dealmaking over the last three decades, totaling at least 185 transactions collectively worth $81 billion, according to disclosures that market research firm Dealogic has verified and compiled.
PROLIFIC DEALMAKING
Spearheading this expansion through acquisitions over the last three decades has been Valerie Mars, the 65-year-old great-granddaughter of Franklin Clarence Mars, who started the company as a candy factory in 1911, according to people familiar with the matter.
As most Mars family members retired from the company and installed trusted lieutenants at the helm, Valerie remained and helped spearhead most of the company's major deals, including the $23 billion purchase of chewing gum maker Wm. Wrigley Jr. Company in 2008, a deal with financial backing from Warren Buffett's Berkshire Hathaway BRKa.N.
As a result, the company's annual net sales grew from a little over $10 billion when Valerie Mars joined it in 1996 to more than $50 billion this year.
As she prepared to stand down as senior vice president of corporate development later this year, Valerie Mars helped the company's CEO Poul Weihrauch, who led the negotiations on the deal with Kellanova CEO Steve Cahillane, the sources said.
The company behind Snickers and Twix already had big market share in the chocolate, gum, and pet nutrition categories, and was looking to invest in new lines of business, such as salty snacks and cereal internationally, where Kellanova, producer of Pringles, Cheez-It and Kellogg’s corn flakes, is strong, the companies said.
While some of Mars' rivals also considered a deal for Kellanova, they could not get comfortable with the purchase price being asked or the lengthy regulatory review that is anticipated, the sources said. While Mars and Kellanova hope antitrust regulators will clear the deal because of their limited product overlap in the first half of 2025, they have given themselves up to two years to complete it in case of protracted scrutiny, according to a Securities and Exchange Commission filing.
HIGH HOPES FOR SPIN-OFF
The negotiations between the two companies started in the last few months, after Kellanova completed its spin from WK Kellogg KLG.N, which was left with the parent company's cereal business in North America, the sources said.
Kellanova's Cahillane and board of directors had high hopes for the new company's stock, and Mars did not believe it could meet their price expectations, the sources added.
But Kellanova's shares struggled after the spin-off in October, trading below their debut price for much of the time since, as investors worried about price inflation and the impact of weight-loss drugs weighing on consumer demand.
It was not until the Chicago-based company raised its annual organic sales and profit forecasts earlier this month and Reuters subsequently reported that Mars was looking to acquire Kellanova that the shares' value grew by about a third.
The purchase price that Mars ended up offering, equivalent to 16.4 times Kellanova's adjusted 12-month cash flow, was in line with other recent deals in the sector, and enough to convince the top company's shareholders, the W.K. Kellogg Foundation Trust and the Gunds -- another wealthy family -- to back the deal, the sources said.
Most of Mars' rivals did not have the deep pockets to pull off a transaction of this size. Mars had $6.6 billion in cash on hand as of the end of December as well as access to $4 billion in credit lines, according to credit ratings agency S&P Global. It also convinced banks to lend it as much as $29 billion for the deal, according to an SEC filing.
Mars' annual dividends are only about $600 million, well below as a percentage of its cash flow than most of its consumer packaged goods peers pay out, according to S&P, reflecting the family's desire to reinvest in the business.
Reporting by Abigail Summerville in McLean, Virginia
Editing by Anirban Sen and Anna Driver
متعلقہ اثاثے
تازہ ترين خبريں
دستبرداری: XM Group کے ادارے ہماری آن لائن تجارت کی سہولت تک صرف عملدرآمد کی خدمت اور رسائی مہیا کرتے ہیں، کسی شخص کو ویب سائٹ پر یا اس کے ذریعے دستیاب کانٹینٹ کو دیکھنے اور/یا استعمال کرنے کی اجازت دیتا ہے، اس پر تبدیل یا توسیع کا ارادہ نہیں ہے ، اور نہ ہی یہ تبدیل ہوتا ہے یا اس پر وسعت کریں۔ اس طرح کی رسائی اور استعمال ہمیشہ مشروط ہوتا ہے: (i) شرائط و ضوابط؛ (ii) خطرہ انتباہات؛ اور (iii) مکمل دستبرداری۔ لہذا اس طرح کے مواد کو عام معلومات سے زیادہ کے طور پر فراہم کیا جاتا ہے۔ خاص طور پر، براہ کرم آگاہ رہیں کہ ہماری آن لائن تجارت کی سہولت کے مندرجات نہ تو کوئی درخواست ہے، اور نہ ہی فنانشل مارکیٹ میں کوئی لین دین داخل کرنے کی پیش کش ہے۔ کسی بھی فنانشل مارکیٹ میں تجارت میں آپ کے سرمائے کے لئے ایک خاص سطح کا خطرہ ہوتا ہے۔
ہماری آن لائن تجارتی سہولت پر شائع ہونے والے تمام مٹیریل کا مقصد صرف تعلیمی/معلوماتی مقاصد کے لئے ہے، اور اس میں شامل نہیں ہے — اور نہ ہی اسے فنانشل، سرمایہ کاری ٹیکس یا تجارتی مشورے اور سفارشات؛ یا ہماری تجارتی قیمتوں کا ریکارڈ؛ یا کسی بھی فنانشل انسٹرومنٹ میں لین دین کی پیشکش؛ یا اسکے لئے مانگ؛ یا غیر متنازعہ مالی تشہیرات پر مشتمل سمجھا جانا چاہئے۔
کوئی تھرڈ پارٹی کانٹینٹ، نیز XM کے ذریعہ تیار کردہ کانٹینٹ، جیسے: راۓ، خبریں، تحقیق، تجزیہ، قیمتیں اور دیگر معلومات یا اس ویب سائٹ پر مشتمل تھرڈ پارٹی کے سائٹس کے لنکس کو "جیسے ہے" کی بنیاد پر فراہم کیا جاتا ہے، عام مارکیٹ کی تفسیر کے طور پر، اور سرمایہ کاری کے مشورے کو تشکیل نہ دیں۔ اس حد تک کہ کسی بھی کانٹینٹ کو سرمایہ کاری کی تحقیقات کے طور پر سمجھا جاتا ہے، آپ کو نوٹ کرنا اور قبول کرنا ہوگا کہ یہ کانٹینٹ سرمایہ کاری کی تحقیق کی آزادی کو فروغ دینے کے لئے ڈیزائن کردہ قانونی تقاضوں کے مطابق نہیں ہے اور تیار نہیں کیا گیا ہے، اسی طرح، اس پر غور کیا جائے گا بطور متعلقہ قوانین اور ضوابط کے تحت مارکیٹنگ مواصلات۔ براہ کرم یقینی بنائیں کہ آپ غیر آزاد سرمایہ کاری سے متعلق ہماری اطلاع کو پڑھ اور سمجھ چکے ہیں۔ مذکورہ بالا معلومات کے بارے میں تحقیق اور رسک وارننگ ، جس تک رسائی یہاں حاصل کی جا سکتی ہے۔
