Candy maker Mars' takeover of Pringles maker Kellanova (K.N) could lead to price hikes because it will boost Mars' negotiating power with retailers, EU antitrust regulators warned on Wednesday as they opened a full-scale investigation into the $36 billion deal.
The move could force Mars to divest assets to address the EU competition concerns or risk the deal being blocked.
Mars said it was disappointed with the EU's decision but it remained optimistic over the outcome of the transaction, which it hoped to close towards the end of 2025.
"We remain confident the pending combination of Mars Snacking and Kellanova's complementary footprints and portfolios will deliver more choice and innovation to consumers," said Mars in a statement.
"Based on the current status of the ongoing antitrust review by the European Commission, we now expect the transaction to close towards the end of 2025; however, the exact timing cannot be predicted with any certainty at this point. We look forward to delivering the benefits of the pending transaction to all Mars and Kellanova stakeholders," it added.
The EU competition enforcer said the deal would boost Mars' product portfolio, giving it increased leverage to extract higher prices during negotiations with retailers and in turn would lead to higher prices for consumers.
It said both companies have a strong market position in several product markets in multiple EU countries due to their brands seen as must-have for consumers.
The Commission also cited concerns from some European retailers about Mars' increased bargaining power and that they may be forced to accept higher prices, in order to avoid not being able to offer the products of Mars and Kellanova.
"As inflation-hit food prices remain high across Europe, it is essential to ensure that this acquisition does not further drive up the cost of shopping baskets," EU antitrust chief Teresa Ribera said in a statement.
The Commission set an Oct. 31 deadline for its decision.
Reuters exclusively reported on June 18 that the deal would trigger intensive EU regulatory scrutiny.
European retailers have voiced worries about the power of large international suppliers of branded packaged goods and the high concentration levels in products such as breakfast cereals, carbonated drinks, confectionery and frozen desserts.
