Italian confectionery giant Ferrero, known globally for brands like Nutella and Butterfinger, has announced its agreement to acquire WK Kellogg Co.’s North American breakfast cereals business in a deal valued at approximately USD 3.1 billion.
The deal, which is a private one, represents Ferrero’s strategic expansion of its roots in the North American market, where its presence to date has been smaller than in Europe.
Under the terms, Ferrero is offering USD 23 per share of WK Kellogg Co. The deal includes Kellogg’s manufacturing, marketing, and distribution rights for the breakfast cereals of the company in the United States, Canada, and Caribbean markets. These include household brands like Froot Loops, Special K, Frosted Flakes, and Rice Krispies.
Shareholders’ Nod Pending
The deal, however, is subject to approval by Kellogg’s shareholders and is expected to close in the second half of this year. Upon completion, WK Kellogg Co. will become a wholly-owned subsidiary of Ferrero, and its shares will no longer trade on the New York Stock Exchange.
On the day of the announcement, WK Kellogg’s stock surged as much as 31%, reflecting strong investor sentiment around the buyout.
A Market in Transition
For WK Kellogg, the sale is happening as cereal consumption falls in the U.S., as people opt more and more for protein bars, shakes, and other convenient morning options. The COVID-19 pandemic had temporarily boosted cereal sales, as more families remained at home, but the post-pandemic economy reversed those gains.
Strategic Rationale
The acquisition for Ferrero fits into its goal to diversify outside of confectionery and further establish its presence in the North American packaged foods business, a high-competitive yet profitable market. Kellogg, however, intends to utilize the proceeds to re-align and invest more into its remaining businesses as well as brand portfolio.
This deal is another instalment in the continuing worldwide re-juggling of consumer goods companies, as firms respond to changing patterns of consumption and geographic priorities.
