M&M’s maker Mars is buying Kellanova, the maker of Cheez-It and Pop-Tarts, in an effort to broaden its snacking portfolio and expand globally in what is being termed the biggest deal of the sector.

Mars Inc said Wednesday that it will pay $83.50 per share in cash. The company put the total value of the transaction at $35.9bn, including debt.

Kellanova was created last year when the Kellogg Company split into two companies. Chicago-based Kellanova sells many of the former company’s most profitable brands, including Pringles, Eggo, Town House, MorningStar Farms and Rice Krispies Treats. It had net sales of more than $13bn last year and has about 23,000 employees.

The deal will give Mars significantly more buying power from suppliers and selling power in negotiations with grocers and other retailers, said Randal Kenworthy, a senior partner specialising in consumer products at the consulting firm West Monroe.

Mars and Kellanova combined would control around 8 percent of the United States snack market, he said, compared to a 9 percent share for PepsiCo, which owns Frito-Lay.

Kenworthy said Kellanova also has a bigger international footprint, which will help Mars expand overseas. And Mars has made many improvements in its organisational efficiency that it can apply to Kellanova, he said.

“Strategically, it makes a lot of sense,” Kenworthy added.

It is the biggest deal in the sector since the JM Smucker Company bought Hostess for $5.6bn last year, and among the largest of 2024 – behind Exxon Mobil’s $60bn acquisition of Pioneer Natural Resources and Capital One Financial’s $35bn acquisition of Discover Financial Services.

Steve Cahillane, Kellanova’s CEO, president and chairman, said Mars approached Kellanova a few months ago to discuss the deal. Cahillane noted that Kellanova posted higher-than-expected revenue in the last few quarters and reaffirmed its full-year guidance despite challenging economic conditions.

“I suspect that Mars – watching that momentum – led them to come forward and say, ‘You know, now’s the time, we ought to talk to these guys,’” Cahillane told The Associated Press news agency in an interview. “So it was really that simple.”

Mars’s purchase of Kellanova is expected to close in the first half of next year. Once it is complete, Kellanova will become part of Mars Snacking, which is also based in Chicago.

Cahillane said that while some corporate functions might be consolidated, he expects most Kellanova employees to be folded into Mars.

“They have chewing gum plants, they have pet food plants, we have Pringles plants and Cheez-It plants. You can’t make our food at their plants,” he said. Cahillane said he will run Kellanova until the deal closes.

‘Expand snacking platform’

Mars, based in McLean, Virginia, is one of the largest privately held companies in the US. Mars said it had net sales of $50bn last year and has 150,000 employees.

“The Kellanova brands significantly expand our snacking platform, allowing us to even more effectively meet consumer needs and drive profitable business growth,” Andrew Clarke, global president of Mars Snacking, said in a statement.

Arun Sundaram, an analyst with investment research company CFRA, said he expects US antitrust regulators to scrutinise the deal given the current backdrop of high food prices. He believes the deal will ultimately go through because there is so little overlap between the portfolios of the two companies.

Kenworthy said regulators might be concerned about the overlap in healthier snacks at the two companies. Kellanova owns the RxBar and NutriGrain brands while Mars owns Kind and Nature’s Bakery. But Cahillane said the overlap is very small in the large and fragmented health bar category.

The acquisition would expand Mars’s reach into the salty snack category. The company owns brands like Combos and Ben’s Original, but it is primarily known for its chocolates, candies and pet food. Mars makes M&M’s, Lifesavers, Juicy Fruit gum and Skittles as well as Pedigree and Royal Canin pet foods, among other products.

Sales of some of Mars’s products, like gum, have sputtered in recent years as snacking habits shift. Chocolate sales have also been declining in the US as younger customers look for other flavours, like sour candy. Unit sales of chocolate in the US have fallen 5.5 percent over the last year, according to Nielsen IQ, a consumer intelligence company.

Other companies have also been adding salty snacks to their lineup in pursuit of changing American tastes. In 2017, candy bar maker Hershey acquired Amplify, the maker of Skinny Pop popcorn, for $1.2bn. Four years later, Hershey spent another $1.2bn for Dot’s Homestyle Pretzels.

The acquisition would also open the door to potentially lucrative product combinations like Skittles-flavored Pop-Tarts or Snickers-flavored Pringles. Such limited-time offers have been showing up more frequently as food companies try to grab consumers’ attention and win space on store shelves.

Kenworthy said the timing is ideal because easing inflation and prices will make name-brand snacks more appealing to customers who have been migrating to cheaper store brands. Economists say that many consumers appear to be returning to pre-pandemic norms, when most companies felt they couldn’t raise prices very much without losing business. Kellanova lowered its prices by 1 percent in North America in the second quarter and saw its sales volumes rise by 2 percent.

The other company formed in the Kellogg split, WK Kellogg Company, retained cereal brands like Raisin Bran, Frosted Flakes and Froot Loops, which have struggled with slowing sales in recent years. It is not involved in the deal.

“Mars is getting the crown jewels in terms of the spinoff components,” Kenworthy said.

Mars got its start in 1911, when founder Frank Mars started making and selling butter cream candy from his home in Tacoma, Washington. The company moved to Chicago in 1929 and introduced the Snickers bar the following year.

Mars has steadily grown through acquisitions. It entered the pet food business in 1935 with the purchase of a UK dog food brand and bought the Dove ice cream brand in 1986. In 2008, it purchased the Wrigley chewing gum business for $23bn.

Shares of Kellanova rose nearly 8 percent to close at $80.28 on Wednesday.