FDBusiness.com

US-based snacks group Diamond Foods is acquiring the Pringles business from Procter & Gamble in a deal worth $2.35b. Pringles is the world’s largest potato crisp brand with sales in over 140 countries and manufacturing operations in the US, Europe and Asia. The brand has been built over 45 years with a combination of proprietary products, unique package design and significant advertising investment.

Pringles will join Diamond Foods’ portfolio of brands, which includes Diamond of California and Emerald nuts, Pop Secret microwave popcorn and Kettle potato chips, creating a premium snack focused company with total revenues of approximately $2.4b. Diamond acquired the Kettle Foods businesses in both the US and the UK from private equity group Lion Capital for $615m in cash last year.

The addition of Pringles will more than triple the size of Diamond’s snack business and leverage its sales and distribution infrastructure through a more than doubling of snack sales in the US and UK, which are Pringles’ two largest markets.

The deal will also allow Diamond to gain a broader global manufacturing and supply chain platform, with access into key growth markets around the world, including Asia, Latin America and Central Europe. International sales will account for approximately 49% of the enlarged Diamond’s revenues on a pro forma basis.

Diamond has a history of building, acquiring and developing brands through product and package innovation, efficient distribution and brand investment. The company’s total revenues have doubled and earnings per share have grown more than four-fold in the past five years.

“Pringles is an iconic, billion dollar snack brand with significant global manufacturing and supply chain infrastructure,” says Michael Mendes, chairman, president and chief executive of Diamond Foods. “Our plan is to build upon the brand equity Pringles has established in over 140 countries. This strategic combination will create an independent, global leader in the snack industry with a focus on quality and innovative products. Not only is this combination immediately accretive, it also creates a platform that we believe will allow us to build shareholder value for years to come.”

Under the terms of a split-merge transaction, P&G shareholders can elect to exchange P&G shares for shares of Diamond. The value of the deal is $2.35b, comprising $1.5b in Diamond common stock for approximately 57% of the combined company, and the assumption of $850m of Pringles debt. Diamond’s existing shareholders would continue to own approximately 43% of the combined company.

Diamond expects to incur one-time costs of approximately $100m related to the transaction over the next two years. P&G also will provide Diamond transition services for up to 12 months after closing.