In the wake of a financial scandal at fast-growing Diamond Foods, Procter & Gamble Co. terminated the planned sale of its Pringles potato crisp business to Diamond on Feb. 15 and announced a $2.7 billion cash deal to sell the unit to Kellogg Co.
“Pringles is an excellent strategic fit for Kellogg Co. It significantly advances the company's goal of building a global snacks business on par with its global cereal business,” Kellogg said in a statement.
And with $1.5 billion in worldwide sales, Pringles also vaults Kellogg into second place among salty/savory snack marketers in the world.
Diamond Foods, once a quiet walnut growers co-operative, has quadrupled in size in just a few years by buying Pop Secret popcorn from General Mills and Kettle Chips – as well as by developing its own Emerald brand of snack nuts. It was destined to double in size again, possibly to $2.5 billion, with its acquisition of Pringles, announced in April of last year.
But that $2.35 billion purchase included $1.5 billion in Diamond stock – which, as an internal investigation this year revealed, may have been artificially inflated by the questionable scheduling of payments to walnut growers. Last week, Diamond’s board fired Chairman, Pres. & CEO Michael Mendes and Executive VP and CFO Steven Neil. The stock price, once above $96, was $22.90 the morning of this announcement.
“Procter & Gamble … and Diamond have mutually agreed to terminate Diamond's proposed acquisition of the Pringles business and have released each other from all liabilities related to the proposed acquisition,” read a Diamond statement earlier on Feb. 15. “No ‘break-up’ or other fees will be paid in connection with this termination.”
Kellogg has been establishing a strong but U.S.-based snacks business since its acquisition of Keebler more than a decade ago, which included the Cheez-It brand of crackers. Recently, it developed Special K Cracker Chips. “With the acquisition of Pringles, the company will build a truly global snacks platform and organization for further growth,” Kellogg officials said.
Pringles claims to be the world's second largest player in savory snacks, with $1.5 billion in sales across more than 140 countries and manufacturing operations in the U.S., Europe and Asia. However, the announcement of the deal specified just two manufacturing facilities, one in Tennessee and one in Belgium.
The companies expect to complete the transaction in the summer of 2012, pending necessary regulatory approvals.