Aug 7 (Reuters) - Mars' contemplated acquisition of U.S.

snack maker Kellanova ( K ) stands a good chance of getting

past global antitrust regulators, legal experts say, even as it

touches on a sensitive area of government oversight -- how much

consumers pay for food.

Reuters reported on Sunday that privately held Mars was

looking to acquire Kellanova ( K ), which has a market value including

debt of $31 billion. The tie-up would come as other deals in the

food sector, such as grocery store operator Kroger's ( KR ) $25

billion proposed acquisition of Albertsons ( ACI ), grapple with

lawsuits from regulators over the impact they would have on

prices following a bout of inflation.

These concerns are acute in the packaged food sector, which

lower-income families have traditionally relied on because fresh

food can be more expensive. The industry has hit shoppers with

higher prices in the last two years, citing higher costs that

started with the COVID-19 pandemic and were exacerbated by

Russia's invasion of Ukraine.

If U.S. regulators do decide to challenge the deal, they may

struggle to convince antitrust judges that uniting Mars, maker

of Snickers, M&M's, Pop-Tarts and Rice Krispies Treats, with

Kellanova ( K ), producer of Pringles, Cheez-It, Pop-Tarts and Eggo

frozen waffles, would raise prices or harm competition in the

market, according to interviews with and notes from six

antitrust lawyers and industry analysts.

This is because of the limited overlap between their

offerings.

Mars' portfolio, which includes Twix, Bounty and Milky Way,

centers on candy and sweets, such as chocolate. The company is

also the world's largest pet food maker and a major operator of

veterinary health centers.

Kellanova ( K ), which split from WK Kellogg Co ( KLG ) last

October, is rooted in a salty snacks business in the U.S. and

around the world, and selling cereal outside of North America.

WK Kellogg was left with the North American cereal business of

Kellogg, the original parent company.

Salty snacks generate about 49% of Kellanova's ( K ) annual

sales, according to data provider Numerator. Mars' snacking

division, which comprises chocolate, candy, gum and bars,

accounts for around 38% of its annual sales, according to a

person familiar with the matter.

Combined, Mars and Kellanova ( K ) would account for roughly 12%

of the U.S. snacking and candy industry, according to market

share data from NielsenIQ. This would still leave the market

with fierce competition, as PepsiCo ( PEP ), Kraft Heinz ( KHC )

, Mondelez ( MDLZ ), Hershey, General Mills ( GIS )

and other big players fight for consumer dollars.

"Even when we broaden out the overlap to be total snacks

together, we don't see a Mars-Kellanova deal setting off many

alarm bells in the Department of Justice or Federal Trade

Commission," JPMorgan analysts wrote in a note this week,

referring to the two principal U.S. antitrust regulators.

Mars and Kellanova ( K ) declined to comment. Spokespeople for the

U.S. Department of Justice and the U.S. Federal Trade Commission

(FTC) also declined to comment.

Internationally, the deal would be subject to regulatory

reviews in the countries where the companies operate. Mars would

also likely argue to regulators in those countries its product

overlap with Kellanova ( K ) is limited, the experts said.

LENGTHY REVIEW LIKELY

Gerald Stein, an antitrust partner at law firm Davis Wright

Tremaine, cautioned that Mars and Kellanova ( K ) should still brace

themselves for lengthy regulatory review. One recent example in

the food sector is Campbell Soup's ( CPB ) $2.33 billion

acquisition of Sovos, maker of the Rao's Homemade pasta sauce.

Campbell Soup ( CPB ) and Sovos planned to complete the deal in

December but pushed the close back to March because of a

protracted review by the FTC studying the overlap in their

offerings.

"The lines aren't as clearly drawn as with cars, BMWs versus

Kias, where you have luxury versus non-luxury products. For

snack foods, it is a hard demographic to parse out," said Stein.

Another caveat, antitrust experts say, is hostility that

antitrust regulators have occasionally shown for big companies

merging even when their markets are fragmented and teeming with

competition. They point to antitrust challenges against the

proposed tie-up between handbag makers Tapestry and

Capri and mattress maker Tempur Sealy's ( TPX ) proposed

acquisition of Mattress Firm as recent examples.

"There is significant risk that just because these companies

are so large and leaders in their segments, they will attract

regulatory scrutiny," said Seth Bloom, a former general counsel

of the U.S. Senate antitrust subcommittee who now runs his own

advisory firm.