Mars’ acquisition of Kellanova faces significant hurdles as the EU has suspended the October deadline to approve the $35.9 billion transaction.
The privately-owned US snacks and confectionery powerhouse, Mars, announced the deal for the owner of the Pringles brand in August, contingent upon approval from competition authorities.
While the US antitrust regulator, the Federal Trade Commission, cleared the deal in June, EU authorities raised initial concerns in May. Subsequently, they initiated an in-depth probe on June 25. This deep dive into the merger has heightened scrutiny.
Preliminary results from the European Commission’s competition body indicated that “the transaction could lead to higher prices for consumers due to Mars’ increased negotiating power towards retailers in the European Economic Area (EEA).”
On this basis, the EC set a deadline of October 31 to approve the deal, contingent on Mars addressing the competition concerns raised.
However, it appears that a satisfactory response has not yet been received. The EC announced today (July 30) that it has “stopped the clock in its investigation,” effective from July 28.
Importantly, the clock can be restarted immediately once Mars meets the specified requirements set forth by the EC.
The “clock” in merger investigations can be paused if the involved parties do not provide, in a timely manner, critical information requested by the Commission for its competition assessment. Once the required information is supplied, the clock restarts, and the legal deadline for the Commission’s decision adjusts accordingly, noted the EC spokesperson.
Upon the launch of the full EC investigation into the Kellanova takeover, which also includes the well-known Cheez-It and Pop-Tart brands, Mars expressed that they were “disappointed but optimistic” regarding the probe’s decision.
The company previously stated that it anticipated the transaction to conclude “towards the end of 2025.”
Mars, known for its Maltesers confectionery, expressed: “We are disappointed yet remain optimistic that this investigation will be positively resolved. We have cooperated with regulatory authorities, providing substantial supporting information and will continue to do so.”
The EC’s preliminary investigation indicated that by expanding its product portfolio with Kellanova’s popular brands, Mars could enhance its bargaining power vis-à-vis retailers.
Moreover, the Commission highlighted concerns that this increased leverage could enable Mars to negotiate higher prices, ultimately resulting in increased costs for consumers.
In the EEA, which includes all EU trading bloc members along with Iceland, Liechtenstein, and Norway, several retailers voiced apprehensions about the deal.
Mars’ acquisition of Kellanova, previously part of Kellogg before a demerger in 2023, stands as one of the largest transactions seen in the packaged foods sector, rivaling the 2015 merger of Kraft Foods and HJ Heinz.
This merger would create a business with annual sales exceeding $60 billion, surpassing the $23 billion Mars invested in the Wrigley’s chewing gum business in 2008, supported by Warren Buffet’s Berkshire Hathaway before his exit in 2016.
Meanwhile, the other half of the Kellogg spin-off—WK Kellogg—is currently navigating a $3.1 billion acquisition by Ferrero, another Italian confectionery giant. That deal, announced in June, is also subject to competition clearance.