Kellogg's to Acquire P&G's Pringles Business for $2.7 Billion
Kellogg has established a strong U.S.-based snacks business since its successful acquisition of Keebler more than a decade ago. Kellogg hopes that the acquisition of such as well-known brand will give them an established platform from which to leverage its brands in the growing worldwide snacks category.
Feb 16 2012 --- Kellogg Company has announced that it has entered into an agreement to acquire Procter & Gamble's Pringles business for $2.695 billion. The acquisition of Pringles significantly advances the company's goal of building a global snacks business on par with its global cereal business.
Kellogg has established a strong U.S.-based snacks business since its successful acquisition of Keebler more than a decade ago. Kellogg hopes that the acquisition of such as well-known brand will give them an established platform from which to leverage its brands in the growing worldwide snacks category.
Kellogg intends to take on the 1,700 talented Pringles employees. The company hopes that the transition in ownership will be smooth.
The companies expect to complete the transaction in the summer of 2012, pending necessary regulatory approvals.
"We are excited to announce this strategic acquisition," said John Bryant, Kellogg Company's president and chief executive officer. "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. We are delighted to welcome the employees of the Pringles organization to Kellogg. Their collective passion and commitment has resulted in Pringles' well-deserved acclaim as one of the most recognized brands in the world."
P&G's Chairman, President and Chief Executive Officer, Bob McDonald, added, "This is an excellent development for P&G, Pringles and Kellogg, creating value for our shareholders and representing an outstanding opportunity for Pringles employees with a leading company in the Food sector. Kellogg shares similar values and principles to us and we are confident that the Pringles business will thrive under Kellogg's leadership."
The deal also provides some relief for Pringles’ parent, Procter & Gamble, which had agreed last year to sell the business to Diamond for $2.4 billion in stock. Diamond was forced to re-state two years of financial earnings after irregularities in accounting related to payments to its walnut growers. The company’s chief executive was also put on administrative leave.
Within hours of the news, Procter & Gamble said it might have to consider alternatives for Pringles. Kellogg had been interested in acquiring Pringles, but had not been able to match the original offer made by Diamond Foods.
Pringles is the world's second largest player in savory snacks, with $1.5 billion in sales across more than 140 countries and manufacturing operations in the U.S., Europe and Asia. The stacked potato crisp has been a mainstay in supermarket snack aisles for more than four decades and is immediately identified by snack lovers worldwide by its unique saddle shape and distinct canister packaging.
The Pringles business enhances Kellogg Company's existing production capabilities with the addition of two world-class manufacturing facilities, one in Tennessee and one in Belgium.
Kellogg Company has agreed to pay Procter & Gamble $2.695 billion in cash for the Pringles business. This is before significant future tax benefits.
As a result, Kellogg anticipates increasing its outstanding debt by approximately $2 billion, and expects to limit its share repurchase program to proceeds received by the company from employee option exercises for approximately two years to allow the company to reduce the increased levels of debt.
Kellogg Company's financial performance in 2012 will depend on several factors, including the exact date of closing.
"Pringles is an exciting brand in a large and growing category," Bryant said. "The addition of Pringles to our global cereal and snacks portfolio will provide an excellent return for stakeholders and better position us for future, profitable growth."
The transaction is subject to customary conditions, including receipt of required regulatory approvals.
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