You are viewing just a glimpse of the 100+ pieces of sophisticated insight and analysis produced by our full-time team of senior financial journalists every day. For full access, check to see if your firm has a license to The Deal Pipeline or login using your existing credentials.
Know your ID?
Username:
 
Password:
Go

Subscriber Content Preview | Request a free trialSearch  
  Go

Consumer & Retail

Print  |  Share  |  Discuss  |  Reprint

Kellogg puts P&G's Pringles in its cart

by Lou Whiteman  |  Published February 15, 2012 at 10:44 AM
Kellogg-puts-PG-Pringles-in-its-cart.jpgKellogg Co. on Wednesday, Feb. 14 struck a deal acquire the Pringles unit of Procter & Gamble Co. for $2.69 billion in cash, moving in after an accounting scandal at Diamond Foods Inc. derailed its planned purchase of the snack business.

Battle Creek, Mich.-based Kellogg said it would expand its borrowing by about $2 billion and limit a share repurchase program to buy Pringles and add it to a growing stable of snack foods that includes Keebler, Cheez-It and Special K Cracker Chips. Pringles generates annual sales of $1.5 billion across more than 140 countries, and Kellogg said the deal should help it towards its goal of growing its global snacks business to match its sprawling cereal operation, which generates a little pver half pf the company's total revenues.

"Pringles has an extensive global footprint that catapults Kellogg to the number two position in the worldwide savory snacks category, helping us achieve our objective of becoming a truly global cereal and snacks company," Kellogg CEO John Bryant said in a statement.

Kellogg said that assuming the deal closes on or around June 30 it expects Pringles to contribute to earnings in 2012 before one-time transaction costs that could total up to $180 million. The company sees synergies of at least $10 million in 2012 and up to $75 million in later years.

Cincinnati-based P&G last April reached a $2.35 billion deal to sell the Pringles business to Diamond Foods, but that transaction was thrown into doubt last week when the buyer announced it would restate its financial results for fiscal 2010 and 2011. San Francisco-based Diamond said that following an investigation by its board's audit committee into crop payments, it had fired its CEO and CFO effective immediately.

P&G said that the Diamond deal had been mutually terminated as provided under the terms of their agreement. P&G expects an after-tax gain on the Kellogg deal of between $1.4 billion and $1.5 billion.

Diamond in a statement confirmed the termination, saying that no "break up" or other fees would be paid. Acting CEO Rick Wolford said that "Diamond now will put its full effort on the growth of our business with focused execution to continue to build our successful brands."

P&G took financial advice from Morgan Stanley's Kristen Rossi and legal counsel from a Jones Day team led by Robert Profusek and Randi Lesnick. Kellogg was advised by Adam Taetle of Barclays Capital and Dan Neff and Ben Roth of Wachtell Lipton, Rosen & Katz. Diamond had been advised by a Fenwick & West LLP team including Douglas Cogen, David Michaels, Michael Solomon and Kee Kim and by Brian Callaci, Jeff Rose and Richard Casavechia of Bank of America Merrill Lynch.

See related story, "Diamond's $2.4B Pringles deal may spoil"

Share:
Tags: Adam Taetle | Bank of America Merrill Lynch | Barclays Capital | Brian Callaci | David Michaels | Diamond Foods Inc. | Douglas Cogen | Fenwick & West LLP | Jeff Rose | Jones Day | Kellogg Co. | Kristen Rossi | Michael Solomon | Morgan Stanley | Procter & Gamble Co. | Randi Lesnick | Richard Casavechia | Robert Profusek
blog comments powered by Disqus

Free preview

This is only a preview of The Deal's sophisticated coverage. Explore the real-time intelligence as researched and reported on by our team of financial journalists with a license to The Deal Pipeline. Click here for more information.

Meet the journalists

Lou Whiteman

Senior writer, aerospace, airlines, defense & conglomerates

Lou Whiteman is senior writer covering industrials and transportation, including negotiations between major airlines and the regulatory concerns affecting M&A in the sector. Contact



Movers & Shakers

Launch Movers and shakers slideshow

Steptoe & Johnson LLP hired Brigida Benitez as a partner in the international regulation and compliance and commercial litigation practices in Washington. For other updates launch today's Movers & shakers slideshow.

Video

Nasdaq explains acquisition strategy

In this video, Bruce Aust, Nasdaq's EVP of the global corporate client group, explains its acquisition strategy, which has recently included several companies in the corporate solutions business. More video

Sectors