“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 President and CEO John Bryant said in a statement.
Kellogg’s stock added $1.70, or 3.4 percent, to $52 in premarket trading. Diamond’s shares gained 88cents, or 3.9 percent, to $23.18, while Procter & Gamble Co.’s stock climbed 8 cents to $64.56.
Kellogg was able to swoop in and make the Pringles deal happen because Diamond Foods Inc., which makes Emerald Nuts and Pop Secret popcorn, and Procter & Gamble have mutually agreed to end their proposed deal.
Kellogg said that its debt is likely to increase by about $2 billion and that it will limit stock buybacks for about two years to allow the company to reduce its debt.
Procter & Gamble expects an after-tax gain of $1.4 billion to $1.5 billion, or about 47 cents to 50 cents per share, from the deal with Kellogg.
Speculation had been growing over the past few days that Diamond’s proposed acquisition of Pringles was in trouble, particularly after the San Francisco company announced a week ago that it was replacing its CEO and CFO following an internal investigation that found that the Diamond improperly accounted for payments to walnut growers. The company now needs to restate two years of financial results.
After those announcements, Diamond’s stock slid, which hurt its ability to finance the Pringles’ deal.
Diamond Foods’ proposed buyout of Pringles was worth $1.5 billion when it was announced in April. It would have been the company’s biggest acquisition ever and made it the second-largest snack maker in the nation behind PepsiCo Inc.
Last week, Cincinnati-based Procter & Gamble said it was evaluating the deal and keeping all options open, even stating that Pringles had “attracted considerable interest from other outside parties.’’
No breakup or other fees will be paid tied to the Diamond deal. Industry experts had believed that Diamond would possibly have to pay a $60 million breakup fee to Procter & Gamble and potentially up to $6 million in related costs.
