Well, this was not just a rumor apparently. Congrats to both companies and their advisors for getting this deal done. Like all deals, time will tell if it was a good one or not.
Many have written about the strategy, so there’s not much more to say beyond affirming the wisdom of this combination if you are Mars. If, like me, you are still wondering about the price, especially for Kellogg’s, here’s some context.
The self-reported EBITDA multiple on this deal is 16.4.
That seems a little rich when you look at Mondelez’s acquisition of Cadbury in 2010 (13x), or 3G’s acquisition of Heinz in 2013 (14x) or General Mills acquisition of Pillsbury in 2001 (11x).
If you are a Kellogg’s shareholder and you look back at what you paid P&G for Pringles in 2012 (11x) or what you paid for Keebler in 2001 (10x), you are feeling great about this deal. These businesses are some of the core assets Mars was after and Kellanova management has extracted tremendous value for them relative to the original investment.
But if Kellanova shareholders have reason to be happy, I am not sure it is because Mars got fleeced. Look at what Heinz/3G paid for Kraft in 2015 (20x), or what General Mills paid for Blue Buffalo in 2018 (25x). Mars itself paid 17x for Wrigley back in 2008, Nestle paid 15x for Purina in 2001, and P&G paid 18x for Gillette in 2005.
(BTW, for the M&A geeks who are silently critiquing this, I acknowledge the multiples above are not cost synergy adjusted and that has a material impact on price evaluation, but I have not seen any synergy estimate yet for Mars-Kellanova - and this is just a LinkedIn post, not real work, so discount my analysis as you see fit.)
Hindsight tells us some of these deals were good and some not so much. In the moment, knowledgeable observers could say which ones seemed reasonably priced and which seemed like overpayment. I don’t claim special knowledge in this case, but Mars-Kellanova seems strategically sound and reasonably priced for the buyer, and a very happy premium for the seller.
I think this will turn out well, and I’d love to hear what others think.
Credit Analyst Extraordinaire & Educator of Leadership
7moCongratulations. Now please make your Crab Chips as good as Herr's