December 5, 2023

DealBook: Diamond Foods and Pringles to Merge

Diamond Foods announced on Tuesday that it would merge with Pringles, a unit of Procter Gamble, in a deal valued at $2.35 billion.

The combination of the two business would create a company with roughly $2.4 billion in annual revenue and earnings of up to $410 million. The deal is expected to increase profit in the first fiscal year, excluding costs associated with the transaction.

“Pringles is an iconic, billion-dollar snack brand with significant global manufacturing and supply chain infrastructure,” Michael J. Mendes, chief executive of Diamond Foods, said in a statement. “This strategic combination will create an independent, global leader in the snack industry with a focus on quality and innovative products.”

The newly combined company will have a portfolio of top snack brands, including Emerald nuts, Pop Secret popcorn and Kettle potato chips. The deal will triple Diamond’s snack business, giving it more influence in grocery stores. The transactions will also give Diamond a bigger presence in fast-growing overseas markets. After the deal closes, international countries will account for 49 percent of the company’s total revenues.

Diamond has been on an acquisition binge in recent years, as it looks to gain size and scale. In 2008, it bought Pop Secret, increasing market share in the brand since then by 3.5 percentage points.

Two years later, Diamond picked up Kettle brand potato chips, whose sales have grown in the double digits. Overall, the company said revenue had doubled in the past five years, with earnings increasing at a faster pace.

The $2.35 billion transaction includes $1.5 billion of Diamond stock and the assumption of $850 million of Pringles debt. Diamond’s shareholders would own roughly 43 percent of the combined company. One-time transaction costs will amount to about $100 million over the next couple of years.

Morgan Stanley and law firm of Jones Day advised P.G. Bank of America-Merrill Lynch and the law firm of Fenwick West advised Diamond.

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