Diamond Foods to buy Pringles

Diamond Foods Inc took its biggest bite yet of the snack business with a US$1.5 billion deal to buy the Pringles brand from Procter & Gamble Company (P&G).

The deal is the biggest in a stack of acquisitions for Diamond and will more than triple the size of the maker of Emerald nuts and Pop Secret popcorn.

Adding Pringles will make it a distant second in the snack business to PepsiCo's Frito-Lay, which controls nearly half of the market.

The move also lets P&G complete its exit from all its major food businesses.

The maker of Tide and Pampers has sold off Folgers coffee, Jif peanut butter, Crisco Shortening and Sunny Delight drinks in recent years.

The Pringles deal will create a new company under the Diamond Foods name. P&G shareholders will get about 57 per cent of the combined company and Diamond shareholders about 43 per cent.

Diamond, founded in 1912 by a group of California walnut growers, was known for nuts in shells for most of its history.

But since Diamond went public in 2005, an acquisition binge has broadened its array of snacks. It scooped up Pop Secret in 2008 and Kettle potato chips last year.

The Pringles transaction will dwarf those deals, more than tripling Diamond's revenue to about US$2.4 billion a year.

"Pringles is an iconic, billion-dollar snack brand with significant global manufacturing and supply chain infrastructure," Diamond Chairman, President and CEO Michael J. Mendes said in a statement.

Salty and savoury snacks like Pringles are a growing business, according to market researcher NPD Group, appealing to consumers who are "on the go".

Pringles was the eighth-largest sweet and savoury snack brand in the United States in 2009, according to the most recent data available from Euromonitor International.

Analyst Timothy Ramey of D.A. Davidson & Company envisions Diamond approaching Pringles much like it did Pop Secret, for which it increased sales through more marketing and distribution.

"We have to believe that Diamond can breathe new life into (Pringles)," Ramey wrote in a client note.

Pringles would become the third billion-dollar brand sold off by P&G in recent years, after Folgers and osteoporosis drug Actonel. It leaves P&G with 23 brands with US$1 billion or more in annual revenue.

- AP