Ferrero Nears Roughly $3 Billion Deal for Maker of Froot Loops, Frosted Flakes
The acquisition of cereal maker WK Kellogg could be finalized as soon as this week
- Ferrero, the maker of Ferrero Rocher and Nutella, is close to finalizing a deal to buy cereal company WK Kellogg for around $3 billion.
- WK Kellogg, valued at $1.5 billion with over $500 million in debt, owns brands like Froot Loops and Rice Krispies.
- Ferrero aims to grow in the U.S. through acquisitions, having previously bought Nestlé’s U.S. chocolate business.
The Italian candy maker behind Ferrero Rocher and Nutella is nearing a roughly $3 billion deal to buy the breakfast-cereal conglomerate WK Kellogg KLG 3.49%increase; green up pointing triangle, according to people familiar with the matter.
The details
Ferrero, a family-owned company, could finalize the deal for the iconic cereal company as soon as this week, barring a last-minute hiccup in the talks, the people said.
A deal would combine two storied consumer food makers from both sides of the Atlantic.
WK Kellogg is the company behind Froot Loops, Frosted Flakes, Rice Krispies and a variety of other cereal monikers. It has a market value today of some $1.5 billion, and more than $500 million in debt.
The invention of Corn Flakes cereal in 1894 by the company’s founder, Will Keith Kellogg, led to the business’s formation in the early 20th century. The story goes that the wheat-based cereal was created as an accident, but it would go on to revolutionize the breakfast-food industry.
Founded close to 80 years ago in Italy, Ferrero has expanded internationally to become the world’s third-largest chocolate confectionery company, with some 35 brands that are sold in more than 170 countries. Its pantry includes Butterfinger, Baby Ruth, Kinder and its namesake chocolate treats.
The group generated revenue of 18.4 billion euros, equivalent to about $21.5 billion, for its latest financial year, up almost 9% from the prior period, boosted by its operations in the U.S. and Italy.
The context
Ferrero has been targeting the U.S. for acquisitions to grow geographically and expand by category. It bought Wells Enterprises, the maker of Blue Bunny and other ice-cream brands, and before that struck a $2.8 billion deal to acquire Nestlé’s U.S. chocolate business.
WK Kellogg is a product of Kellogg spinning off its North American cereal business into a separate publicly traded company about two years ago. The remaining global snacking business, called Kellanova, agreed to sell itself to Mars in a more than $30 billion blockbuster transaction last year.
The deal would come when Americans’ penchant for snacking is changing. Higher prices on grocery shelves combined with a push toward healthier options means consumers are picking up different habits when they shop and eat. Companies, in turn, are being forced to adapt.
WK Kellogg has also been under fire for its use of artificial food dyes in some of its breakfast cereals, especially so after Robert F. Kennedy Jr., a critic of the additives, became the country’s top health official.
Other recent deals in the snacking space include PepsiCo’s acquisition of tortilla-chip maker Siete Foods, J.M. Smucker’s acquisition of Twinkies snack-cake maker Hostess Brands and Hershey’s deal for better-for-you popcorn brand LesserEvil.