Italian confectioner Ferrero, identified for manufacturers like Nutella and Kinder, is shopping for the century-old U.S. cereal firm WK Kellogg in an effort to develop its North American gross sales.
The Ferrero Group stated Thursday it’s going to pay $23 for every Kellogg share, or roughly $3.1 billion. The transaction consists of WK Kellogg Co.’s six manufacturing vegetation, and the advertising and distribution of its breakfast cereals throughout america, Canada and the Caribbean.
WK Kellogg’s shares had been up 31% in early afternoon buying and selling Thursday.
Kellogg was based in Battle Creek, Michigan, in 1906 after its founder by chance discovered 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. vegetation, that are positioned 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 had 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 develop 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 Prime.
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 objects. Cereal gross sales obtained a bump through the coronavirus pandemic as extra households stayed house, however gross sales continued to say no after the pandemic eased.
At the beginning of July, U.S. chilly cereal gross sales had been down 6% in comparison with the identical interval in 2022, in line with market analysis firm Nielsen IQ. Kellogg’s internet gross sales fell 2% to $2.7 billion in 2024.
Brad Haller, a senior accomplice 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 will assist the European firm negotiate pricing and positioning for its merchandise.
The acquisition additionally helps Ferraro develop past snacks and sweets and right into a meal class, Haller stated. However the firm additionally could wind up chopping Kellogg manufacturers or shutting down manufacturing vegetation.
“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. An almost three-month strike by employees in any respect its U.S. cereal vegetation in late 2021 harm gross sales. And final fall, dozens of individuals rallied outdoors 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 embrace 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 now not commerce on the New York Inventory Alternate and the corporate will change into a Ferrero subsidiary.
