Snap, crackle, sale: Nutella maker Ferrero plans to buy WK Kellogg for $3 billion

WK Kellogg's shares were up 31% in mid-afternoon trading on Thursday.

Kellogg was founded in Battle Creek, Michigan, in 1906 after its founder accidentally figured out how to make flaked cereal while he was experimenting with granola. Kellogg still makes Corn Flakes, as well as Froot Loops, Special K, Frosted Flakes, Rice Krispies and other cereals.

Kellogg now has four U.S. plants, which are located in Michigan, Pennsylvania, Tennessee and Nebraska. It also has a plant in Mexico and a plant in Canada. The company has around 3,000 employees.

The current company was formed in 2023, when Kellogg snack brands like Cheez-It and Pringles were spun into a separate company called Kellanova. M&M's maker Mars Inc. announced last year that it planned to buy Kellanova in a deal worth nearly $30 billion.

Ferrero Group, a privately held, family-owned company founded in Italy in 1946, has been trying to expand its U.S. footprint. In 2018 it bought Nestle's U.S. candy brands, including Butterfinger, Nerds and SweeTarts. In 2022, it bought Wells Enterprises, the maker of ice cream brands like Blue Bunny and Halo Top.

"Over recent years, Ferrero has expanded its presence in North America, bringing together our well-known brands from around the world with local jewels rooted in the U.S. Today's news is a key milestone in that journey, giving us confidence in the opportunities ahead," Ferrero Executive Chairman Giovanni Ferrero said in a statement.

Gary Pilnick, WK Kellogg's chairman and CEO, said the combination would give Kellogg resources to grow its brands and "explore opportunities beyond cereal." Pilnick also said that Ferrero has a track record of supporting the communities in which it operates.

Kellogg has been struggling with a long-term decline in U.S. cereal consumption as consumers turned to protein bars, shakes and other breakfast items. Cereal sales got a bump during the coronavirus pandemic as more families stayed home, but sales continued to decline after the pandemic eased.

At the start of July, U.S. cold cereal sales were down 6% compared to the same period in 2022, according to market research company Nielsen IQ. Kellogg's net sales fell 2% to $2.7 billion in 2024.

Brad Haller, a senior partner for mergers and acquisitions at West Monroe, said Kellogg's large distribution network and relationships with grocery chains in North America is appealing to Ferrero because it would help the European company negotiate pricing and positioning for its products.

The purchase also helps Ferraro expand beyond snacks, chocolate and sweets and into a meal category, Haller said. But the company also may wind up cutting Kellogg brands or shutting down manufacturing plants, he said.

"As Americans, these brands are iconic and beloved by us, but a European company buying these wouldn't have the same nostalgia," Haller said.

Kellogg has had other issues. A nearly three-month strike by workers at all its U.S. cereal plants in late 2021 hurt sales. And last fall, dozens of people rallied outside the company's Battle Creek headquarters demanding that Kellogg remove artificial dyes from its cereals.

Earlier this year, Kellogg said it was reformulating cereals sold to schools to remove artificial dyes and will not include them in any new products starting in January.

Ferrero's acquisition, which still needs approval from Kellogg shareholders, is expected to close in the second half of the year. Once the transaction is complete, Kellogg's stock will no longer trade on the New York Stock Exchange and the company will become a Ferrero subsidiary.