MCLEAN, VA. — Within the space of a day, Mars Inc. gained US Federal Trade Commission clearance to acquire fellow snack maker Kellanova and learned that the European Commission (EC) has opened an investigation into the $35.9 billion deal.

The FTC on June 25 announced it granted an early termination of its probe into the nearly year-old Mars-Kellanova transaction. Earlier in the day, the EC — the executive branch of the European Union (EU) — said it has launched an “in-depth investigation” of the planned acquisition, citing competitive concerns under the EU Merger Regulation.

 Kellanova shareholders had voted in favor of the acquisition agreement back in early November. The deal would take publicly held Kellanova private into family-owned Mars.

“We are very pleased that the FTC has completed its review of the transaction without the imposition of any condition or requiring any remedy,” said Poul Weihrauch, chief executive officer and president of McLean, Va.-based Mars. “The transaction has now received all but one of the 28 required regulatory clearances, with only the review by the European Commission outstanding. This brings us one step closer to uniting two iconic businesses with complementary footprints and portfolios, allowing us to deliver more choice and innovation to consumers.”

Unveiled Aug. 14, 2024, Mars’ deal to buy Kellanova is aimed at doubling the size of the food and candy giant’s snack business over the next decade. Plans call for Kellogg Co. spinoff Kellanova to join the Mars Snacking business unit, led by global president Andrew Clarke and based in Chicago. Mars Snacking already has 15 billion-dollar brands, and Kellanova would add another two — Pringles and Cheez-It — plus expand Mars’ presence in better-for-you snacks.

FTC clearance for Mars to complete the transaction “represents a significant milestone on our path to combine Mars Snacking and Kellanova,” said Steve Cahillane, chairman, president and CEO of Chicago-based Kellanova.

“We continue to believe this is an exciting opportunity to create a broader, global snacking business that is better positioned to meet evolving consumer needs and preferences,” Cahillane said.

Daniel Guarnera, director of the FTC’s Bureau of Competition, said the agency “turned over every stone” in evaluating the potential competitive impact of the Mars-Kellanova deal.

“Commission staff closely reviewed every aspect of this transaction, including both specific product markets and potential portfolio effects from the acquisition,” he said. “After nearly a year of investigation, dozens upon dozens of interviews with non-parties at all levels of the supply chain (including large chains and small, independent businesses), extensive data analysis, sworn testimony from party witnesses, and the review of hundreds of thousands of documents, staff found that the evidence pointed in one direction: This transaction does not meet the standard for an anticompetitive merger set by Section 7 of the Clayton Act.”

Still, Guarnera noted that the FTC’s US competitive assessment doesn’t necessarily apply to international markets, where Mars and Kellanova sell various other products.

“In other countries, Mars and Kellanova offer different products than they do in the United States, and they face different market participants, consumer preferences and shopping practices,” he said. “Notably, Kellanova continues to sell breakfast cereal in other markets, including the European Union, that it does not sell in the United States.”

Indeed, the EC said it has “preliminary concerns” that the merger could hoist prices for consumers. With the addition of Kellanova, Mars would gain increased bargaining power with retailers in the European Economic Area (EEA), and the stronger leverage in negotiations with buyers may lead to higher prices for shoppers, the commission explained.

“By acquiring Kellanova, Mars will add several very popular brands of potato chips and cereals to its already broad and strong product portfolio,” said Teresa Ribera, executive vice president for clean, just and competitive transition at the EC. “As inflation-hit food prices remain high across Europe, it is essential to ensure that this acquisition does not further drive up the cost of shopping baskets. Our in-depth investigation will assess the transaction’s impact on the price of these companies’ products for consumers in the EEA.”

The European Commission cited Mars’ addition of Kellanova potato chips and cereals, which include the Pringles and Kellogg’s brands, as among its competitive concerns.

| Photo: ©ESKAY LIM – STOCK.ADOBE.COM

The EC said it received notification of the Mars-Kellanova deal on May 16 and, with the start of the investigation, now has until Oct. 31 to render a decision on the transaction.

Mars initially had forecast a first-half 2025 completion of the Kellanova acquisition but, after the EC review was announced, pushed back its expected closure of the transaction to “towards the end of 2025.”

“We remain confident the pending combination of Mars Snacking and Kellanova’s complementary footprints and portfolios will deliver more choice and innovation to consumers,” Mars said in an email statement on June 26. “The European Commission announced that it has opened a Phase II investigation into the transaction. We are disappointed yet remain optimistic that this investigation will be positively resolved. We have cooperated with the regulatory authorities, furnishing substantial supporting information and will continue to do so.

 “We look forward to delivering the benefits of the pending transaction to all Mars and Kellanova stakeholders.”

Together, Mars and Kellanova would form a global company with annual revenue of more than $63 billion and 173,000 employees. The combined business’ product categories would span snacking, food and pet care on a worldwide basis, frozen breakfast and plant-based foods in North America, and cereal and noodles internationally.

The deal would firmly plant Mars — known mainly for candy and chocolate brands like Snickers, M&M’s, Mars, Twix, Dove, Milky Way, 3 Musketeers, Skittles, Extra, Wrigley’s Doublemint, Life Savers and Starburst — in the cracker, salty snacks, bar and breakfast sections of the grocery store. The roster for Kellanova spans a host of popular brands, led by Pringles, Cheez-It, Pop-Tarts, Rice Krispies Treats, NutriGrain, RxBar and, in the frozen breakfast category, Eggo.

On the food side, Mars offers products in such segments as rice and grains, sauces, spreads, shelf-stable and refrigerated entrees, soups and sides, cooking aids, better-for-you items and ethnic dishes in over a dozen brands, including Ben’s Original, MasterFoods, Seeds of Change, Tasty Bite, Foodspring, Dolmio and Kevin’s Natural Foods. 

Other Kellanova brands that would join Mars’ portfolio include Kellogg’s Club, Kellogg’s Grahams, Carr’s (US) and Zesta (crackers); Town House (crackers, flatbread, pita snacks); Toasteds (crackers and flatbread); Austin (sandwich crackers); MorningStar Farms (plant-based foods); Pure Organic (fruit snacks); and Special K (cereal) in North America, as well as the Kellogg’s international cereal business.