Kellanova Stock Surges on Potential Mars Takeover

Kellanova (K) stock is trading notably higher Monday, even as the rest of the stock market sells off. Boosting K shares is news that Mars, the parent company of M&M’s and Snickers, is in advanced talks to acquire the snack maker whose brands include Cheez-It and Pringles.

A deal could be imminent and value Kellanova at around $30 billion, according to The Wall Street Journal (WSJ), citing people familiar with the matter. This would make it one of the largest acquisitions of the year. However, talks could still fall apart, they add.

Kellanova was spun off from Kellogg last year. In its latest earnings release, the company’s revenue decreased 4.7% year-over-year to $3.2 billion while its earnings per share increased 12.2% from the year-ago period to $1.01.

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Mars is one of the largest private companies in the United States and is a global manufacturer of confectionery, food and pet food products. Its most popular brands include M&M’s, Snickers, Skittles and Wrigley’s.

“We believe a transaction would further validate the power of Kellanova’s brands and growth potential, both in North America and internationally,” wrote Stifel analyst Matthew Smith. “The transaction would be the largest packaged foods transaction since the Kraft Heinz merger.”

Smith added that the pipeline for potential mergers and acquisitions of packaged food businesses is very full.

Is Kellanova stock a buy, sell or hold?

Heading into today’s session, Kellanova was up nearly 15% for the year to date on a total return basis (price change plus dividends). Yet, Wall Street is on the sidelines when it comes to the consumer staples stock.

According to S&P Global Market Intelligence, the average analyst target price for K stock is $66.99, representing a discount about 6% to current levels. Additionally, the consensus recommendation is a Hold.

However, analysts likely did not factor in a potential takeover with their estimates and ratings, so there may be revisions in the days and weeks ahead.