The stock of WK Kellogg (KLG) is up 50% in after hours trading on reports that chocolate maker Ferrero is offering $3 billion to buy the cereal company.
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Ferrero, a privately held Italian company known for its Ferrero Rocher hazelnut chocolates, could finalize an acquisition of the breakfast foods company within days, according to media reports. Battle Creek, Michigan-based WK Kellogg, which makes cereals such as Corn Flakes and Froot Loops, was spun off as a standalone company in 2023.
A separate publicly traded concern, Kellanova (K), now houses snack brands such as Pringles and Cheez-It. M&M owner Mars, also privately owned, agreed to buy Kellanova for $36 billion last year in a deal that has not yet been finalized. WK Kellogg stock has fallen about 1% this year, and the company has a $1.5 billion market capitalization.
Packaged Foods Deal
A Ferrero acquisition of WK Kellogg would be the latest example of consolidation in the packaged food industry. Many consumers have abandoned sugary cereals in favor of breakfast options that are considered healthier, while other shoppers have moved down to private label brands that are cheaper to buy.
The purchase of WK Kellogg would expand European Ferrero’s operations and reach in the U.S. market. In May of this year, the company announced a new slate of products aimed at appealing to American consumers, including peanut Nutella and Dr Pepper flavored Tic Tac candies.
Is KLG Stock a Buy?
The stock of WK Kellogg has a consensus Moderate Buy rating among seven Wall Street analysts. That rating is based on three Hold and four sell recommendations issued in the last three months. The average KLG price target of $16.71 implies 4.51% downside from current levels.
