By Christopher Shim, Adit Rajeev (University of Cambridge) Mariona Planella Boix, Pau Rodríguez Coll, Ismael Fathy Martínez (ESADE)
Overview of the deal
Acquirer: Mars, Incorporated
Target: KIND North America
Implied Equity Value: $5 Billion
Total Transaction Size: Not Disclosed
Closed date: November 17, 2020
Target advisor: Not Disclosed
Mars Inc will be acquiring KIND LLC in a bid to gain access to KIND’s operations across 35 countries and thus extend its global reach. While the terms of the deal have not been disclosed as of November 17, 2020, what has been confirmed is that an agreement was reached between both parties stating that KIND LLC will operate as a separate business within Mars’ global operations. In addition, those familiar with this acquisition commented that the deal valued KIND at about $5 billion. This deal comes at around three years after Mars Inc bought a minority stake in KIND in a bid to expand their reach in the consumer market for health foods, and KIND LLC’s founder Daniel Lubetzky will retain financial stake in his company following the acquisition.
“KIND is gaining a lot of traction globally, but it’s just taking longer than we would have liked.” - Daniel Lubetzky, Founder of KIND North America
Company Details: Acquirer – Mars Inc
Mars Inc is a multinational manufacturer based in the United States specialising in packaged food products ranging from beverages, confectionaries, pet food and animal care services. Mars Inc serves customers on a global level and has five key business segments, which are namely: Mars Wrigley Confectionery, Mars Petcare, Mars Food, Mars Drinks, and Mars Symbioscience.
Headquarters: McLean, VA
CEO: Grant F. Reid
Number of Employees: 130000
Company Details: Target - KIND LLC
KIND LLC is also a multinational manufacturer based in the United States, and its lines of business mostly includes the wholesale distribution of groceries. As of May 2019, it offers eight lines which are namely KIND PLUS, KIND Fruit & Nut, KIND Healthy Grains Bars, STRONG & KIND, KIND Frozen, KIND Healthy Grains Clusters, KIND Breakfast, Pressed by KIND, and KIND Nuts & Spices.
Headquarters: New York, NY
CEO: Michael J. Barkley
Number of Employees: 500
Projections and Assumptions
The Covid-19 pandemic has had a severe impact on the food and beverage industry. Manufacturers were faced with supply chain disruptions and diminishing B2B sales, forcing them into a difficult position. With the acquisition of KIND, Mars has high expectations over the next months in terms of sales and growth. The acquisition will allow Mars to reinforce its position in the market with coverage of potential clients and unlock revenue and cost synergies, in both the short and long term. The large customer bases of the companies will allow both Mars and KIND to generate more sales than separately, through cross-selling, and as a result of the acquisition, companies will have the opportunity to reduce redundant costs significantly.
Under the terms of the acquisition, KIND will function as a distinct and separate business under the Mars umbrella. Daniel Lubetzky (KIND Founder and Executive Chairman) will play a key role in the future development and expansion of KIND, helping to maximize the reach and impact of the KIND mission and products, while upholding the KIND Promise as the brand expands into new categories and geographies.
According to a new report by Grand View Research, the global healthy snacks market size is expected to reach USD $32.88 billion by 2025, expanding at a CAGR of 5.2% during the forecast period. Furthermore, Mintel market data shows that customers, especially younger demographics, are willing to pay higher prices for natural and healthy products. Mars detected an attractive option in KIND that could allow for entry into an emerging market, letting the company adapt as a leader in the food space.
KIND is a well-positioned player in this industry, and its acquisition will provide Mars the opportunity to enter a profitable segment and expand their portfolio, as well as add loyal customers. Moreover, the acquisition of KIND has been one of the pillars of Mars’ post-Covid-19 recovery strategy. While Mars is best known for its confections and gum, adding to its portfolio a large player in the better-for-you and clean-label markets can diversify strategically the product portfolio to meet changing human trends.
As one of the biggest food and beverage companies in the US, Mars plans to grow even more with the acquisition of KIND in the next few years in a market which is increasingly moving away from traditional candy products into healthier, clean-label and more convenient ones.
As KIND founder Lubetzky said: “We don’t need to worry about getting a return in 2021. We can think about investments that make sense for two, three, five, ten years out.”
Risks and Uncertainties
The key motivation behind Mars’ proposed expansion of its existing partnership with KIND International is the potential to further tap into consumers’ growing healthy-eating habits. However, in 2019, several nutritionists argued that KIND bars may not actually be ‘healthy’, despite theKIND Promise. Dr Robert Lustig, a paediatric endocrinology professor at the University of California, suggested that “On a scale of one to ten, one being Coca-Cola and ten being whole foods, KIND bars are likely a four… It’s less unhealthy than others. That doesn’t necessarily make something healthy.” Clearly, if post-acquisition, heavier scrutiny on KIND’s products expands this sentiment amongst the general public, Mars may struggle to achieve the growth into new markets and success of its newly-formed global health and wellness platform that it aims for.