After Mars's $36 billion acquisition of Kellogg's, Utz, Celsius, and Freshpet have become the focus of the food industry's mergers and acquisitions? Analyst opinions are currently divided

Zhitong
2024.08.19 06:42

After Mars acquired Kind Snacks for $36 billion, Utz Brands, Celsius Holdings, and Freshpet have become potential acquisition targets in the food industry. Analysts believe that Utz Brands is a suitable choice for Hershey to expand its savory snack line, Freshpet attracts companies unfamiliar with the pet food market, and Celsius is a potential target of interest for Pepsi. Overall, there are divergent opinions among analysts, and the market continues to closely monitor the future M&A prospects of these brands

According to the Zhitong Finance and Economics APP, Piper Sandler analysts pointed out that after Mars Inc. - a globally renowned family-owned snack and candy manufacturer with brands like M&M's and Snickers - announced its $36 billion acquisition of Kellogg (K.US) last Wednesday, Utz Brands (UTZ.US), Celsius Holdings (CELH.US), and Freshpet (FRPT.US) may become potential acquisition targets in the food industry.

In a report, Piper Sandler analyst Michael Lavery suggested that Hershey (HSY.US) may expand its savory snack product line to compete more effectively with the merged Kellogg/Mars entity, making Utz Brands a logical acquisition candidate as a purely savory snack brand. Lavery stated, "While we are unsure which savory snack businesses Hershey might be interested in, we have long believed Utz Brands is an attractive potential supplement for larger companies looking to expand their product portfolios."

Furthermore, Lavery mentioned that Freshpet is an attractive acquisition target for any pet food company. While Mars Inc. already has a significant pet business and may not be interested in "another deal in the near term," Freshpet could be appealing for companies not currently in the pet food sector, similar to General Mills (GIS.US) entering the market through the acquisition of Blue Buffalo in 2018.

Lavery also noted that Celsius Holdings is another appealing acquisition target, especially for PepsiCo (PEP.US), which already holds about 8.5% of Celsius. With Celsius' stock price having dropped 26% since the beginning of the year, this decline in stock price may spark PepsiCo's interest in an acquisition.

However, Stifel analyst Matthew E. Smith offered a different perspective in his report, suggesting that while Mars' acquisition of Kellogg is significant in scale, it is unlikely to trigger a new wave of consolidation in the food industry. Smith explained, "We do not believe the Mars-Kellogg deal will trigger a large-scale consolidation across the entire food industry. Despite soft market volume environments, companies remain focused on driving revenue growth through investments, and we expect M&A activity to continue as a driver of growth rather than just for scale benefits."

Smith further added that while the Kellogg deal's valuation is at the high end of expectations, it will not prevent other transactions within the industry. He believes that the valuation level of this deal will not stall industry M&A activity or have an unreasonable impact on future deal valuations

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