Feb. 10 (Bloomberg) -- Procter & Gamble Co. has decided it will seek to terminate its sale of the Pringles snack business to Diamond Foods Inc., said three people with knowledge of the situation, following the accounting probe that ousted Diamond’s chief executive officer.
P&G, which agreed in April 2011 to sell Pringles to Diamond for $1.5 billion, must now determine how to exit the deal and whether Diamond will resist the breakup, said one of the people, who declined to be identified because the matter is private. If the sale were to proceed, P&G shareholders would own a majority of Diamond’s stock, which fell 37 percent yesterday.
Diamond, which sells Emerald snack nuts, said Feb. 8 it was putting CEO Michael J. Mendes and its chief financial officer on leave, as well as restating earnings for the past two years, after the board found payments to walnut growers had been booked in the wrong periods.
Cincinnati-based P&G had previously said the sale depended on a favorable resolution of the probe. P&G finds the results “very disappointing,” Paul Fox, a spokesman, said Feb. 8 in an interview. Pringles has attracted “considerable interest” from other potential buyers, he said.
“Our position has not changed from last night,” Fox said yesterday in an e-mailed statement. “We are disappointed by Diamond’s news and we need time to evaluate. In the meantime, we will keep all our options open.”
A spokesman for Diamond had no immediate comment.
Divesting Pringles would get P&G, the world’s largest consumer-products company, out of the food business. The company does sell pet food including the Iams and Eukanuba labels, along with Tide detergent, Crest toothpaste and Pampers diapers.
“Pringles is a very valuable asset,” Ali Dibadj, an analyst at Sanford C. Bernstein in New York, said Feb. 8 in an interview. Snack foods is a growing business, with scant private-label competition, he said.
P&G’s CEO, Robert McDonald, is looking overseas to grow the maker of Olay skin creams and Old Spice aftershave. The company said last month it expects about 37 percent of revenue to come from developing markets this year, compared with 35 percent in 2011. Last year, 59 percent of the company’s $82.6 billion in sales came from outside North America, according to data compiled by Bloomberg.
Diamond, based in San Francisco, sells Kettle chips and Pop Secret microwave popcorn. Adding P&G’s stackable Pringles chips would have boosted its global presence and more than tripled the size of its snack business.
--With assistance from David Welch in Detroit. Editors: Elizabeth Wollman, Stephen West
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