Shares of Diamond Foods, Inc. (DMND) touched a new life-time high of $63.96 on Tuesday. The packaged food company said it agreed to buy Pringles business of Procter & Gamble Co. (PG) in a deal valued at $2.35 billion.
The Pringles brand will now combine with Diamond's dynamic portfolio of brands such as Kettle Chips, Emerald snack nuts, and Pop Secret popcorn to create a premium snack-focused company with total annual revenues of about $2.4 billion, tripling the size of Diamond's snack business.
The deal has the approval of both the companies boards, but is subject to approval by Diamond shareholders, and is expected to close by the end of the calendar year.
The total consideration for the deal includes $1.5 billion in Diamond common stock and the assumption of $850 million of Pringles debt. Upon closing, the combined entity will be about 57 percent owned by Procter & Gamble shareholders who elected to exchange their shares for about 29.1 million Diamond shares. Diamond's existing shareholders would continue to own about 43 percent of the combined entity.
The San Francisco, California-based Diamond Foods said the combination is immediately accretive, but expects to incur one-time costs of approximately $100 million related to the transaction over the next two years. The combined business will remain headquartered in San Francisco, California, and be be managed by Diamond's executive team and board of directors, led by Mendes.
Based on the closure of the merger by the end of the year, Diamond anticipates strong growth in its core business with fiscal 2012 earnings of $2.85 to $2.98 a share on a standalone basis, adjusted earnings in the $3.00 to $3.10 a share range. The company also projects sales of about $1.8 billion. Street analysts predict profit of $2.98 a share on revenue of $1.02 billion.
Meanwhile, the transaction will result in a one-time earnings increase for Procter & Gamble of about $1.5 billion after tax or about $0.50 a share, with only modest earnings dilution of $0.02 to $0.04 per share on an annualized basis.
Diamond Foods stock gapped open sharply higher April 5 at $62 compared to previous day's close of $57.22. The stock touched a new high of $63.96 on Tuesday.
The stock closed Tuesday's regular trading up 6.71 percent at $61.06 on a record volume of 3.15 million shares on the NASDAQ Stock Market. The stock traded between $36.72 and $63.96 during the past 52 weeks. The stock has been rising since March 16.