Following rumors of a possible purchase by Ferrero, the Italian candy behemoth behind brands like Ferrero Rocher and Nutella, WK Kellogg Co. (NYSE: KLG) had a notable after-hours spike, gaining 54.63% to end at $27.06.
After-Hours Rally Follows Acquisition News
The Wall Street Journal on Wednesday, revealed that Ferrero is nearing a deal to acquire WK Kellogg (KLG) for approximately $3 billion. In comparison to KLG’s current market valuation of around $1.5 billion, this amount indicates a significant premium.
Ferrero’s U.S. Expansion Strategy
With the proposed acquisition, Ferrero would undertake yet another bold move to solidify its position in the US food industry. Under Chairman Giovanni Ferrero’s direction, Ferrero, which has long been recognized for its candies and confections, has been growing.
The company recently purchased Wells Enterprises, producer of Blue Bunny ice cream, and acquired Nestlé’s U.S. chocolate operations in a $2.8 billion deal. With 15 production and distribution facilities spread across North America and the Caribbean, Ferrero now employs over 5,100 workers in the region.
Beyond Candy: Strategic Diversification
The acquisition of WK Kellogg is in line with Ferrero’s overarching plan to expand its business outside confections and solidify its position in the US consumer goods industry. Due in major part to consumer preferences for less expensive breakfast options, WK Kellogg, which separated from the Kellogg Company in 2023, has been struggling with declining revenues and decreased demand.
The company’s repositioning as an acquisition target is similar to that of its rival, Kellanova, which reached a $36 billion agreement with Snickers manufacturer Mars last year.
Health Scrutiny and Reformulation Efforts
Amid mounting criticism over the use of artificial dyes in some of its cereals, WK Kellogg has taken steps to address regulatory concerns. KLG recently held discussions with Health Secretary Robert F. Kennedy Jr. and announced plans to reformulate school-served products to eliminate artificial food coloring.
If the Ferrero deal materializes, shareholders would receive an estimated $27.61 per share, net of $570 million in debt—a potential windfall in a rapidly consolidating food sector.
