MCLEAN, VIRGINIA, Aug 14 (Reuters) - A running joke

among residents of McLean, Virginia is that the most secretive

organization headquartered in their Washington D.C. suburb is

not the Central Intelligence Agency, but rather a confectionery

and pet products company.

Here, the second-richest U.S. family runs Mars Inc, maker of

M&M's candies and Pedigree pet food, out of a nondescript

building with no corporate logo or any other identifying

signage. The CIA's offices, on the other hand, even have a

parkway exit sign.

Forbes pegs the net worth of the Mars family members at $117

billion, exceeded in the United States only by the Walton

family's wealth, estimated at $267 billion. The Waltons own the

ubiquitous Walmart ( WMT ) chain of stores. fortune

The vast majority of the Mars family is derived from the

eponymous company, one of the few conglomerates to have snubbed

a stock market listing in favor of secrecy. The company says

this allows it to make decisions for the long term without

worrying about investors scrutinizing its earnings every

quarter.

Being privately held also means that, should a major

acquisition sour, Mars is not under stock market pressure to

take a writedown, giving it more appetite for risk, interviews

with more than a dozen people familiar with its strategy show.

The interviews with these people, who requested anonymity

because of confidentiality restrictions they are under, shed

light on how Mars, flush with cash and dominant in the food

categories it is active in, decided to place its biggest ever

bet on expansion -- the $36 billion acquisition of snack and

cereal maker Kellanova ( K ) it announced on Wednesday.

Spokespeople for Mars and Kellanova ( K ) declined to comment on

the details of their negotiations.

The deal is the culmination of a flurry of Mars' dealmaking

over the last three decades, totaling at least 185 transactions

collectively worth $81 billion, according to disclosures that

market research firm Dealogic has verified and compiled.

PROLIFIC DEALMAKING

Spearheading this expansion through acquisitions over the

last three decades has been Valerie Mars, the 65-year-old

great-granddaughter of Franklin Clarence Mars, who started the

company as a candy factory in 1911, according to people familiar

with the matter.

As most Mars family members retired from the company and

installed trusted lieutenants at the helm, Valerie remained and

helped spearhead most of the company's major deals, including

the $23 billion purchase of chewing gum maker Wm. Wrigley Jr.

Company in 2008, a deal with financial backing from Warren

Buffett's Berkshire Hathaway ( BRK/A ).

As a result, the company's annual net sales grew from a

little over $10 billion when Valerie Mars joined it in 1996 to

more than $50 billion this year.

As she prepared to stand down as senior vice president of

corporate development later this year, Valerie Mars helped the

company's CEO Poul Weihrauch, who led the negotiations on the

deal with Kellanova ( K ) CEO Steve Cahillane, the sources said.

The company behind Snickers and Twix already had big market

share in the chocolate, gum, and pet nutrition categories, and

was looking to invest in new lines of business, such as salty

snacks and cereal internationally, where Kellanova ( K ), producer of

Pringles, Cheez-It and Kellogg's ( K ) corn flakes, is strong, the

companies said.

While some of Mars' rivals also considered a deal for

Kellanova ( K ), they could not get comfortable with the purchase

price being asked or the lengthy regulatory review that is

anticipated, the sources said. While Mars and Kellanova ( K ) hope

antitrust regulators will clear the deal because of their

limited product overlap in the first half of 2025, they have

given themselves up to two years to complete it in case of

protracted scrutiny, according to a Securities and Exchange

Commission filing.

HIGH HOPES FOR SPIN-OFF

The negotiations between the two companies started in the

last few months, after Kellanova ( K ) completed its spin from WK

Kellogg, which was left with the parent company's cereal

business in North America, the sources said.

Kellanova's ( K ) Cahillane and board of directors had high hopes

for the new company's stock, and Mars did not believe it could

meet their price expectations, the sources added.

But Kellanova's ( K ) shares struggled after the spin-off in

October, trading below their debut price for much of the time

since, as investors worried about price inflation and the impact

of weight-loss drugs weighing on consumer demand.

It was not until the Chicago-based company raised its annual

organic sales and profit forecasts earlier this month and

Reuters subsequently reported that Mars was looking to acquire

Kellanova ( K ) that the shares' value grew by about a third.

The purchase price that Mars ended up offering, equivalent

to 16.4 times Kellanova's ( K ) adjusted 12-month cash flow, was in

line with other recent deals in the sector, and enough to

convince the top company's shareholders, the W.K. Kellogg

Foundation Trust and the Gunds -- another wealthy family -- to

back the deal, the sources said.

Most of Mars' rivals did not have the deep pockets to pull

off a transaction of this size. Mars had $6.6 billion in cash on

hand as of the end of December as well as access to $4 billion

in credit lines, according to credit ratings agency S&P Global.

It also convinced banks to lend it as much as $29 billion for

the deal, according to an SEC filing.

Mars' annual dividends are only about $600 million, well

below as a percentage of its cash flow than most of its consumer

packaged goods peers pay out, according to S&P, reflecting the

family's desire to reinvest in the business.