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| Pringles |
The deal, in which Diamond Foods will issue stock to P&G and also assume $850 million in Pringles debt, will more than triple the size of Diamond's snack business.
Diamond Foods has been growing rapidly through acquisitions. Last year it doubled in size with another foray into chips, its $615 million acquisition of premium potato-chip maker Kettle Foods. It other brands include Diamond of California and Emerald nuts and Pop Secret popcorn.
The deal will be structured to minimize the tax impact to P&G shareholders, who can elect to exchange P&G shares for Diamond shares. P&G will set up an entity to own the Pringles business, and merge it with Diamond. P&G shareholders will own 57% of the new entity.
P&G used the same structure when it sold Folgers coffee to Smuckers in 2008.
Tuesday, Diamond gave a relatively cautious 2012 earnings forecast for its core business, predicting a per-share profit of $2.85 to $2.98, compared with the $2.98 average estimate of analysts polled by Thomson Reuters.
Assuming the Pringles deal closes by the end of the current calendar year, it forecast adjusted earnings per share of $3 to $3.10 on $1.8 billion in net sales for its 2012 fiscal year.
P&G, meanwhile, has been planning to shed some production systems, manufacturing lines and brands. The maker of Tide detergent and Pantene shampoo has continued to look for cost savings to help offset rising commodities expenses.
Pringles, which are called "crisps" rather than chips because they aren't 100% potato, are sold in more than 140 countries and are manufactured in the U.S., Europe and Asia.
Diamond executives said the time was right to jump on another deal after "meaningfully" completing most of the integration from the Kettle deal.
"You don't get to pick your time with good transactions," Diamond Chief Executive Michael Mendes said on a call with analysts.
Sources: http://online.wsj.com
