Why Kellogg Stock Skyrocketed as Much as 33% on Thursday

Key Points

• Reports emerged late Wednesday that a potential deal was in the works.

• Kellogg announced Thursday morning that it would be acquired by Italian company Ferrero.

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Shares of WK Kellogg (NYSE: KLG) charged sharply higher Thursday, surging as much as 33.7%. As of 10:40 a.m. ET, the stock was still up 33.6%.

The catalyst that sent the iconic cereal maker soaring was news that the company would be taken private.

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A sweet deal

Reports emerged late Wednesday that Kellogg, purveyor of such well-known cereal brands as Frosted Flakes, Fruit Loops, and Mini Wheats, was being courted by Italian confectionery maker Ferrero, which is best known for its Nutella, Ferrero Roche, Kinder, and Keebler brands, according to an exclusive report in The Wall Street Journal.

In a press release that dropped before the market opened on Thursday, Kellogg announced that it had entered into a definitive agreement to be acquired by Ferrero. Kellogg shareholders will receive $23 per share in an all-cash deal, and roughly 40% higher than recent share prices. The deal values the cereal maker at roughly $3.1 billion in total enterprise value. Ferrero noted the acquisition was the next step in its growth strategy of expanding its reach into "renowned, beloved brands with strong consumer relevance."

Under the terms of the agreement, which has been unanimously approved by its board of directors, Kellogg will become a wholly owned subsidiary of Ferrero. The deal is also being supported by the W.K. Kellogg Foundation Trust and the Gund Family, which own roughly 21.7% of outstanding shares and have committed to vote in favor of the transaction. The agreement is subject to approval by regulators and Kellogg shareholders, and is expected to close in the second half of 2025.

The company has undergone a transformation in recent years. In late 2023, Kellogg's North American cereal business was spun off from the predecessor company, which was rebranded Kellanova and retained the company's snack food brands, including Pringles and Cheez-It, and its frozen food brand Morningstar Farms.

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Danny Vena has no position in any of the stocks mentioned. The Motley Fool recommends WK Kellogg. The Motley Fool has a disclosure policy.