Research Update: Mars Inc. Downgraded To 'A' On Kellanova Acquisition; Off CreditWatch Negative; Outlook Stable

U.S.-based Mars Inc., a family-owned manufacturer and marketer of confectionery, food, and pet care products and services, is acquiring Kellanova for about $36 billion, or about 16.4x based on Kellanova's last-12-month S&P Global Ratings-adjusted EBITDA as of June 29, 2024 (deal was announced in Aug. 2024). We believe the proposed acquisition would substantially increase Mars' leverage. We expect the transaction to close in the first half of calendar 2025. The company expects to fund the acquisition entirely with net debt. We do not forecast the company will restore leverage to below 3x or sustain discretionary cash flow (DCF) to debt well above 10% until fiscal 2027. We expected the company to maintain those metrics for the 'A+' rating. As a

...- U.S.-based Mars Inc., a family-owned manufacturer and marketer of confectionery, food, and pet care products and services, is acquiring Kellanova for about $36 billion, or about 16.4x based on Kellanova's last-12-month S&P Global Ratings-adjusted EBITDA as of June 29, 2024 (deal was announced in Aug. 2024). We believe the proposed acquisition would substantially increase Mars' leverage. We expect the transaction to close in the first half of calendar 2025. - The company expects to fund the acquisition entirely with net debt. We do not forecast the company will restore leverage to below 3x or sustain discretionary cash flow (DCF) to debt well above 10% until fiscal 2027. We expected the company to maintain those metrics for the 'A+' rating. - As a result, we lowered our issuer credit rating to 'A' from 'A+' and our issue-level rating on its senior unsecured debt to 'A' from 'A+'. We removed the ratings from CreditWatch, where they were placed with negative implications on Aug. 15, 2024,...

Research Update