Diamond Foods Inc. (DMND) and Procter & Gamble Co. (PG)
mutually agreed to terminate Diamond's proposed acquisition of the
Pringles canned-chips business, and Kellogg Co. (K) stepped in with
an offer worth $2.695 billion.
Diamond had agreed to pay $2.35 billion to buy the Pringles
business last April, but the deal unraveled following an an
internal probe at Diamond that found it had wrongly accounted for
payments to walnut growers.
The findings marked a stunning comedown for the once-obscure
walnut growers' cooperative, which under Chief Executive Michael J.
Mendes tried to become a force in the snacks business through a
series of acquisitions since 2005. Those efforts peaked
The parties said Wednesday that no breakup other fees will be
paid in connection with the termination.
"Diamond has enjoyed a positive and constructive working
relationship with P&G throughout this process, and the mutual
termination of our agreement and release of all associated
liabilities was reached in the same spirit," said Rick Wolford,
Diamond Foods' acting president and chief executive. "Diamond now
will put its full effort on the growth of our business with focused
execution to continue to build our successful brands."
Meanwhile, Kellogg predicted the Pringles purchase will add
roughly 8 cents to 10 cents a share to its 2012 full-year earnings,
before transaction costs. Including costs tied to the deal, Kellogg
said the transaction will likely dilute earnings by between 11
cents and 16 cents a share.
In addition, Kellogg expects its outstanding debt to increase by
roughly $2 billion, and plans to limit its share repurchase program
as a result. One-time costs of the deal were pegged at roughly $160
million and $180 million; $70 million to $90 million of which it
expects to be recognized in 2012.
Last week Diamond fired its chief executive and chief financial
officer and said it would restate financial results for two years
in light of the probe.
The Wall Street Journal reported last week that the results of
the probe-- which was launched after the Journal raised accounting
questions in September-- would be turned over to the U.S.
Securities and Exchange Commission and the San Francisco U.S.
attorney's office, which have been investigating Diamond and how it
handled the payments, citing a person familiar with the matter
said.
The accounting controversy sprung out of California's walnut
groves, which once sold the bulk of their output to Diamond. But
the interests of growers and the company began to separate after
the company began to answer to public shareholders. Growers have
complained that Diamond, which sets walnut prices in secret and
pays for crops in a series of payments months after they are
delivered, began paying less than other buyers in recent years.
Shares of Kellogg closed Tuesday at $50.30 and were inactive in
premarket trade. Shares of Procter & Gamble closed at $64.48
and were also inactive. Shares of Diamond Foods were also inactive
after closing at $22.30 Tuesday.
-By Lauren Pollock and Mia Lamar, Dow Jones Newswires;
212-416-2356; lauren.pollock@dowjones.com