Bernstein reiterates Market Perform rating on Kellanova stock amid EU probe

Investing.com - Bernstein maintained its Market Perform rating and $83.00 price target on Kellanova (NYSE:K), currently trading at $79.86 with a market capitalization of $27.7 billion, as the European Commission investigates the proposed acquisition by Mars. According to InvestingPro analysis, the stock appears to be trading near its Fair Value.

The firm noted limited direct overlap between Kellanova’s product portfolio, which includes Salty Snacks and Ready-to-Eat Cereal, and Mars’ primary focus on Chocolate Candy, suggesting minimal category competition between the two companies. The stock has demonstrated remarkable stability with a low beta of 0.31, and notably has maintained dividend payments for 55 consecutive years, currently yielding 2.85%.

Bernstein’s analysis indicates that while Mars maintains a significant presence in the Snacks category, other major industry players possess larger flagship brands than those owned by either Kellanova or Mars.

The research firm outlined three potential outcomes involving licensing or sale scenarios, including Kellanova potentially divesting Pringles or its cereal portfolio in Germany, France, or across the European Union to satisfy regulatory concerns.

Bernstein estimates significant downside risk of approximately 35% if European regulators reject the deal outright, calculating that Kellanova’s share price could fall to around $54 from the proposed acquisition price of $83.50, with few alternative potential buyers identified.

In other recent news, Mars, Incorporated and Kellanova have announced that the U.S. Federal Trade Commission has completed its antitrust review of Mars’ acquisition of Kellanova without imposing any conditions. The transaction has received 27 out of 28 required regulatory clearances, with only the European Commission’s review pending. Meanwhile, the European Commission has initiated a Phase II investigation into the merger, expressing concerns about Mars’ market share in certain product categories within the EU. The companies anticipate the merger to close toward the end of 2025, subject to customary closing conditions and regulatory approvals.

Additionally, Citi analysts have resumed coverage of Kellanova with a Neutral rating and a price target of $83.50, noting the stock’s future valuation may hinge on the successful completion of the acquisition. In executive news, Kellanova has announced that Amit Banati, the Vice Chairman and Chief Financial Officer, will resign to pursue another opportunity. John Renwick has been appointed as the acting Senior Vice President and Chief Financial Officer, effective immediately. These developments come as Kellanova navigates through significant changes in both its corporate structure and pending acquisition.

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