Key Points
Kellogg shares rocketed higher after the company announced it was being acquired for $23.
Italian snacking behemoth Ferrero hopes to take the company private, just months after rumors circulated about a potential buyout.
The deal serves as a reminder not to forget about the “boring” stories available on the market.
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Shares of cereal maker WK Kellogg (NYSE: KLG) rose 34% this week as of noon E.T. Thursday, according to data provided by S&P Global Market Intelligence.
One week after being added to a slew of Russell Value indexes, it turns out WK Kellogg was indeed a good value investment — at least in the eyes of Ferrero.
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On Wednesday, the Italian chocolate and candy juggernaut announced plans to buy Kellogg for $23 per share, prompting this week’s spike in price.
The acquisition announcement comes just months after rumors circulated about the two merging earlier in February.
Nutella and cereal: A perfect match?
Snacking behemoth Ferrero is home to brands such as Ferrero Rocher, Tic Tac, Kinder, and Nutella. While adding Kellogg’s cereal brands, such as Froot Loops, Frosted Flakes, Rice Krispies, and Special K, may seem a bit off-course, the acquisition expands Ferrero’s footprint in the United States.
Image source: Getty Images.
Investing-wise, current Kellogg shareholders are unlikely to benefit any further, as the company’s share price is already within 1% of the $23 acquisition price. Barring the limited potential for a bidding war, or the deal falling through (which would probably harm shareholders), investors can probably redeploy this capital elsewhere.
This acquisition serves as a reminder not to overlook the multitude of “boring” consumer staples available today at sub-market valuations. Whether it’s Kraft Heinz, Hershey, Tyson Foods, Lamb Weston, or fellow cereal makers General Mills and Post, food stocks were the original recurring-revenue businesses, offering stability to any portfolio at the right price.
In an era where artificial intelligence (AI) and quantum computing stocks steal most of the investing hype, it’s essential to keep an eye on value opportunities like these blue chip food stocks — just like Ferrero did.
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Josh Kohn-Lindquist has positions in Hershey. The Motley Fool has positions in and recommends Hershey. The Motley Fool recommends Kraft Heinz and WK Kellogg. The Motley Fool has a disclosure policy.
