The European Commission has opened an investigation into Mars’ proposed $36bn acquisition of Kellogg’s spinoff Kellanova.
Preliminary investigations raised fears the deal could lead to higher prices on shelves, thanks to Mars’ increased negotiating power with European retailers.
Adding Kellanova’s high profile brands to its portfolio would give Mars the leverage to “extract higher prices during negotiations” thanks to their “must-have” brands, the EC said.
Several retailers had raised concerns about the deal, feeling that they would be unable to delist Mars-Kellanova’s brands for fears shoppers would switch supermarket altogether, leaving retailers little bargaining power to suppress inflation.
“As inflation-hit food prices remain high across Europe, it is essential to ensure that this acquisition does not further drive up the cost of shopping baskets,” said Teresa Ribera, executive vice-president for clean, just and competitive transition at the EC.
“Our in-depth investigation will assess the transaction’s impact on the price of these companies’ products for consumers in the EEA.”
The EC now has 90 working days, until 31 October, to take a decision. Should it decide against Mars, it could force the US snacking giant to divest assets.
The US competition watchdog, the FTC, cleared the deal on Wednesday.
“Our job is to determine whether there is a violation of American law that we can prove in court. And once we’ve concluded there is not, our job is to get out of the way,” said Bureau of Competition director Daniel Guarnera, announcing the end to the FTC review of the deal.
The acquisition, offered as a $36bn cash deal, will be the biggest in Mars’ history, following a $23bn acquisition of Wrigley in 2008.
Under the terms of the deal, Mars has offered $83.50 for shares in Kellanova – a premium that caused shares in the Kellogg’s spinoff to rocket from around $57 per share to just over $80, a price that held from mid-August 2024 to early June this year.
The Grocer has contacted Mars and Kellanova for comment.
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