Place cereal in a large bowl; set aside. In a large heavy saucepan over low heat, melt the chips, peanut butter and butter; stir until smooth. Remove from the heat; stir in vanilla. Pour over cereal mixture and toss gently to coat.
Place confectioners' sugar in a large resealable plastic bag; add bacon bits and cereal mixture. Close bag and shake to coat. Spread onto waxed paper; let stand until set. Store in airtight containers for up to 2 weeks.