Kellanov shares surge on potential Mars takeover

Kellanova (K) stock is trading sharply higher Monday, even as the rest of the stock market sells off. K stock is gaining on 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.

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

Kellanova was spun out of Kellogg last year. In its latest earnings report, the company’s revenue fell 4.7% year over year to $3.2 billion, while earnings per share rose 12.2% from the same period a year earlier to $1.01.

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

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

Smith added that the M&A opportunity in the packaged food sector is significant.

Are Kellanova shares worth buying, selling or holding?

Before today’s session, Kellanova was up nearly 15% for the year on a total return (price change plus dividends) basis. However, Wall Street has been on the sidelines when it comes to consumer stocks.

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

However, analysts likely did not factor the potential takeover into account in their estimates and ratings, so there could be changes in the coming days and weeks.