Ferrero announced Thursday it will buy cereal maker WK Kellogg (KLG) for a price tag of $3.1 billion, or $23 per share.
This deal will bring brands including Ferraro Rocher, Nutella, and Tic Tac together with cereal brands like Frosted Flakes and Froot Loops.
Shares of Kellogg were up as much as 30% on Thursday to trade near $22.85, just below the announced deal price. The stock surged as much as 50% late Wednesday after The Wall Street Journal first reported the two sides were close to a deal.
Ahead of the news, shares of Kellogg had been down about 3% so far this year.
“We believe this proposed transaction maximizes value for our shareowners and enables WK Kellogg Co to write the next chapter of our company’s storied legacy,” WK Kellogg chairman and CEO Gary Pilnick said in the release. The deal is expected to close in the second half of 2025.
The company also shared it expects second quarter revenue to come in the range $610 million-$615 million, lower than analysts’ expectations for closer to $650 billion, per Bloomberg consensus estimates.
Last quarter, its net sales fell 6.2% year-over-year to $663 million, while net income also fell 45.5% to $18 million. At the time, Kellogg lowered its sales guidance, with expectations for net sales to fall between 2%-3% for the year. Earnings growth is expected to fall within a range of 0% to -2%, compared to prior guidance for earnings growth of 4%-8%.
Over the four weeks ending June 29, cereal category sales fell 1.8% “in line with the trend from recent months,” Stifel analyst Matthew Smith wrote in a note to clients. For WK Kellogg in particular, dollar sales were down 5.7% in that same time frame.
It could get even worse when compared to the highs of the pandemic, per Smith. He said that “cereal sales had been running down -1.5% or so, we believe the volumes are likely to continue to move towards the historical decline rate.”
This deal comes nearly two years after Kellogg split into two companies, WK Kellogg and Kellanova (K), the latter of which houses its snack brands like Pop-Tarts and Cheez-Its. Kellanova is set to be acquired by Mars Candy for closer to $36 billion dollars.
This deal also comes during what’s been an active time for deals in the food and beverage space.
In addition the Mars-Kellanova tie-up, PepsiCo (PEP) announced deals for Siete Foods and soda brand Poppi earlier this year for $1.2 billion and $1.95 billion, respectively.
For Ferrero, the deal gives the company a deeper foot print in the US, with its executive chairman Giovanni Ferrero calling the deal a “key milestone” in its efforts to growth in North America presence.
The company recently acquired Wells Enterprise, behind the ice cream brand Blue Bunny, and Nestle’s US chocolate business.
Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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