news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

A merger worth hundreds of billions of dollars is about to happen.

The latest news: Food giant Mars is acquiring a retail companyKellogg's(Kellanova), the latter's current market value is close to US$25 billion (about RMB 180 billion).

You may not be familiar with these names, but their products can be found everywhere. The buyer, Mars, owns brands such as Dove, Wrigley, and Snickers; the seller, Kellogg, is best known in China for its Pringles potato chips. If the acquisition is successful, it will create the largest deal in the food industry this year.

Pringles, born in 1968, is the world's first canned potato chip brand.Procter & GambleMars has become the world's largest potato chip brand, with sales in more than 140 countries and regions. This time, Mars spent hundreds of billions of dollars, which once again proves the hot scene of global mergers and acquisitions.

Founded over 50 years ago

The former number one potato chip brand is about to be sold

The story of Pringles potato chips begins with a scientist.

In 1965, American organic chemist Fredric Baur gave Procter & Gamble a brilliant idea to make potato chips into a "hyperbolic paraboloid". The potato chips rolled into a saddle shape are not easy to break when subjected to two opposing forces. He also invented a potato chip can rolled up with tin foil and kraft paper, so that potato chips of the same size can be lined up for easy transportation.

Thus, the world's first sealable canned potato chips were born. This was almost a revolution in the snack industry. Before Pringles, potato chips were large and small and mostly packaged in bags; since then, every potato chip has the same size, shape and weight. However, after the Pringles potato chips with the logo of a fat old man with a curly beard were launched, sales were sluggish for a time, and they were even regarded as one of the most failed products in P&G's history.

It was not until the 1980s that Pringles adjusted its taste and became a hit product thanks to a TV commercial starring Brad Pitt. Statistics show that Americans consume 300 million Pringles chips every day.

There is also an episode: Procter & Gamble filed a lawsuit to prove that Pringles are not real potato chips. Traditional potato chips are made by deep-frying potatoes, while the potato content of Pringles is less than 50%. The court ruled that Procter & Gamble did not need to pay the 15% "potato chip value-added tax".

Pringles entered China in 1997 and once occupied a place in China, becoming a social currency for children. However, due to its inability to localize, it was soon seized by Lay's and Kopik.

The turning point came after 2000, when P&G began to divest non-core brands, selling Jif peanut butter, Folgers coffee and other food businesses, and Pringles could not escape the fate of being sold. At that time, P&G's announcement showed that Pringles was the world's largest potato chip brand, with products sold in more than 140 countries.

Finally, in 2012, P&G announced the sale of Pringles potato chips to Kellogg's for US$2.695 billion (approximately RMB 18.8 billion), which also marked P&G's official withdrawal from the food industry.

Kellogg, which acquired Pringles, is a century-old company. As early as 1894, after the company's founder WK Kellogg accidentally invented cereal, Kellogg breakfast cereal gradually became synonymous with cereal breakfast in the United Kingdom and the United States. This transaction also made Kellogg the world's second largest snack company at the time.

Previously, the head of Kellogg Company said that since acquiring the Pringles brand, the business has more than doubled and net sales now exceed US$3 billion, but the company has not yet fully realized its potential and the next goal is US$4 billion.

However, 56-year-old Pringles was suddenly put on the shelves.

180 billion, who is the buyer?

Candy giant Mars was the first to extend an olive branch.

This is a battle. According to reports, Mars' potential competitors are Oreo's parent company Mondelez International and chocolate giantHershey's。

Negotiations between the two parties have not yet been finalized. If a deal is reached, it will be the largest deal in the food industry this year. Kellogg's current valuation is close to $25 billion.

Maybe you have not heard of Mars, Incorporated, but it is hard not to know its products. Dove, Snickers, M&M's, Skittles, Crispy Rice, Wrigley, Extra... These brands that occupy a leading position in categories such as chocolate, candy, and chewing gum all belong to Mars, Incorporated.

The starting point of Mars and Pringles is similar, both originated from a groundbreaking idea.

Forrest, who was still a student at the time, proposed a product plan to his father's candy factory: to coat a common maltose syrup with chocolate to turn it into solid candy with a chocolate taste.

This idea was equivalent to turning cheap syrup into a challenger to expensive chocolate. Eventually, his father accepted his suggestion and developed this new product, named it Milky Way Bar, which became a big hit after it was launched on the market.

In 1927, the company was officially renamed Mars and subsequently launched the epoch-making product Snickers. With this candy, Mars quickly became the second largest candy manufacturer in the United States.

Since then, Mars has expanded its business to include pet food, and ranks first in the world in both candy and pet food. Today, Mars is still not listed, but is one of the largest private family businesses in the world, with annual sales of more than $50 billion and more than 150,000 employees.

Mars' M&A journey is also very exciting. In 2008, Mars privatized Wrigley for $23 billion to supplement its chewing gum business; in 2017, it acquired VCA, the largest chain of pet hospitals in the United States, for $7.7 billion. Since the beginning of this year, Mars has successively acquired British high-end chocolate brand Hotel Chocolat, French veterinary diagnostic companies Cerba Vet and ANTAGENE.

Morningside Venture Capital once analyzed that in industrial mergers and acquisitions, the target is more important than the price. As an industrial acquirer, Mars, unlike PE financial investors, pays more attention to the strategic value and synergy potential when selecting targets, and has a longer time to digest the high premium paid and conduct in-depth integration.

This time, Mars is targeting Pringles potato chips, which shows that it is looking for more possibilities in other fields.

Valuation decline

Big mergers and acquisitions

Looking ahead, we can see that the M&A world is full of smoke this year.

Big deals are everywhere. Just as the well-known Barbie doll is also being sold, last month, LVMH Group's private equity company L Catterton is planning to acquire the toy giantMattel（MATTEL）。

Founded in 1945, Mattel has been popular around the world for decades with its Barbie dolls and its current market value is US$6.6 billion (equivalent to RMB 47.8 billion).

There is also a large merger and acquisition that is familiar to the financial circleBlackRockAcquired 100% of Preqin's business and assets for £2.55 billion (approximately RMB 23 billion) in all cash.

As for the global "PE king"Blackstone, and has recently been reported to acquire Indian food giant Haldiram's. It also announced the purchase of Japanese digital comics provider Infocom, which created the largest private equity acquisition in Japan this year.

At the same time, Carlyle Group also announced plans to acquire KFC Japan through a public tender offer and privatize and delist it. The total transaction price is approximately 130 billion yen (approximately 6 billion yuan).

The logic behind these scenes is not difficult to understand: when the economy goes down, the valuation of the target will return to a reasonable range. When many high-quality projects are becoming cheaper than before, it is a good time for companies with abundant cash and M&A funds to seek better targets.

In short,“The project has become cheaper.”

I still remember that a year ago, Xin Yuesheng, managing partner of Xinchen Capital, shared his observations on the M&A market at the Zero2IPO conference. He took the Chinese market as an example and said that the pricing system is being restructured and new valuation standards are still being explored, but it is certain that project valuations will become reasonable. "With 20 years of investment experience, I know that this low period is actually the time to make a lot of money."

Not long ago, Silver Lake Capital officially announced its seventh flagship fund, Silver Lake Partners VII, with a scale of US$20.5 billion (approximately RMB 148 billion), setting a record for the largest fundraising so far in 2024. Without exception, the direction of the new fund is aimed at large mergers and acquisitions, which is undoubtedly a vivid portrayal.

On the other side of the ocean, China is also experiencing a wave of mergers and acquisitions. The most indicative moment is that Zhang Yong, former chairman and CEO of Alibaba Group, officially joined Morningside Venture Capital and served as managing partner with founder Liu Xiaodan, focusing on the new future of mergers and acquisitions investment.

We are looking forward to a big deal appearing in China.