Hungry for a new brand of snacks, Diamond Foods (NASDAQ:DMND) is gobbling up Pringles potato chips from consumer products giant Procter & Gamble (NYSE:PG) for $1.5 billion in stock, plus the assumption of $850 million in debt.
By snatching up Pringles, Diamond will get its hands on the world’s largest and most iconic potato crisp brand with sales in more than 140 countries.
Diamond sees the deal immediately adding to its bottom line and tripling the size of its snack portfolio, which already includes Pop Secret popcorn and Kettle potato chips.
The deal will give P&G shareholders 57% of the combined company, which will remain headquartered in San Francisco and continue to be run by its current management team. ExistingDiamond shareholders will continue to own about 43% of the combined company.
“Pringles is an iconic, billion dollar snack brand with significant global manufacturing and supply chain infrastructure," Diamond CEO Michael Mendes said in a statement. “Not only is this combination immediately accretive, it also creates a platform that we believe will allow us to build shareholder value for years to come."
The new entity is expected to generate $2.4 billion a year in sales and assume $850 million of Pringles debt.
In the wake of the acquisition, Diamond hiked its fiscal 2012 view to EPS of $2.85 to $2.98, which would represent a 15% to 20% rise from the year before, on sales of about $1.8 billion.
The Pringles buy is expected to close by the end of 2011.
P&G, which is still the parent of a slew of big-name brands like Bounty, Cascade and Crest, said it sees the transaction diluting its EPS by 2 cents to 4 cents.
Shares of Diamond rallied on the acquisition, rising 7.65% to $61.60 ahead of Tuesday’s open. P&G gained 0.21% to $62.39.