Stocks of a multinational snack corporation Kellanova ( K 7.76% ) Shares are experiencing a significant increase in value on Wednesday, slightly more than a week after their previous surge. Typically a less active stock, today it saw a rise in value due to the confirmation of a rumor that Mars intends to acquire the company for $35.9 billion. As a result, Kellanova stock surged nearly 8% by 10:30 a.m. Eastern Time.
An offer that is impossible to resist
In October, Kellogg Company separated its North American cereal business into a new entity. WK Kellogg The other brands and regions were merged into Kellanova, according to management. This move was aimed at forming a snack business with better growth prospects, which would appeal to investors. Privately owned Mars also found this proposition appealing.
Mars, the company behind popular snacks like Snickers and Skittles, plans to purchase Kellanova at a price of $83.50 per share. Currently, this offer translates to a potential increase of around 4% for Kellanova’s stock value.
RBC Capital analyst Nik Modi had previously estimated that Kellanova’s value in a buyout could be $108 per share, which is nearly 30% higher than the current buyout price. Nevertheless, in my opinion, Mars’ offer is quite generous as it is close to three. Kellanova’s sales figures over a period of time. That is a reasonable cost for a. food company experiencing slight increase.
What actions should the shareholders take at this moment?
Let’s simplify things. There are two probable results: The agreement will be finalized, or it won’t. Regarding the first scenario, it might require some time. When it happens, the stock will have approximately 4% more room for growth. Shareholders need to consider if this increase is satisfactory for them to continue holding their shares.
Investors who own Kellanova shares should take into account that the stock is currently at its highest value ever and is trading approximately 40% above its usual price. Therefore, if the agreement does not materialize for any reason, it is likely that Kellanova stock will experience a significant decrease in the short term.
I believe it is a good idea to divest from Kellanova stock at this time and reallocate the funds to other investments.
