👉 Background: Mars Inc is the family-owned human food, pet food and snacking behemoth that started back in 1911 in the USA. It owns some major food brands around the world like Mars Bar, Milky Way, Maltesers, M&M’s, Twix and Extra chewing gum. It also owns pet food brands Whiskas and Royal Canin.

‍👉 What happened: In August last year, Mars announced it would acquire Kellanova for $35.9 billion USD in an all-cash deal. Kellanova is the owner of Pringles, Pop-Tarts, NutriGrain and LCM Bars. The combined company will become one of the top 5 packaged food and beverage companies in the world, but somebody’s gotta fund this deal.

‍👉 What else: So now, Mars is planning to sell up to $30 billion USD of bonds in order to fund the acquisition of Kellanova. If this lands, this bond offering could become one of the largest M&A financing deals in the last decade.

What's the key learning?

💡Bonds are often used to finance major acquisitions. And when a company issues bonds, it’s essentially taking a loan from investors. The bond issuer pays interest on the bond (known as coupon payments) and eventually return the principal amount at the maturity of the bond.

💡When it comes to funding an acquisition, businesses have three main options:

• Option 1: Pay for it with cash on hand - but when we’re talking 10’s of billions of dollars, that becomes pretty rare
• Option 2: Raise capital for the acquisition by issuing new shares - this dilutes current ownership for existing shareholders
• Option 3: Debt financing like a loan or bonds - corporate bonds are a common way for large companies to raise capital without diluting their ownership

💡Mars isn't the first company to use bonds to fund their mega acquisitions.

• Microsoft sold nearly $20 billion worth of bonds to fund its Linkedin acquisition
• Anheuser Busch InBev issued $46 billion USD of bonds to finance its acquisition of SABMiller

So Mars has already mastered the chocolate gam and this bond will give it a serious play for the snack throne too.