Procter & Gamble Co. has nixed its deal to sell its Pringles potato chips business to struggling Diamond Foods Inc., agreeing instead to a $2.7-billion all-cash offer from Kellogg Co.
The transaction, which is expected to close this summer, will allow P&G to exit the snack-food business and gives cereal maker Kellogg a popular addition to its line of snacks. Pringles — stacked, crispy chips served out of distinctive long canisters — racked up $1.5 billion in sales last year and are sold in more than 140 countries.
P&G's decision to sell to Kellogg follows a failed effort by Diamond to acquire Pringles. The Stockton company had reached an agreement with P&G in April to buy the chip brand in a deal valued at $2.35 billion, a move that would have tripled the size of Diamond's snack business.
But the Diamond deal unraveled after the company admitted that it had wrongly accounted for payments to walnut growers and would have to restate its 2010 and 2011 financial statements. The company conducted an investigation and put Chief Executive Michael Mendes and Chief Financial Officer Steven Neil on administrative leave as it looked for replacements.
In a terse statement, P&G described Diamond's disclosure as "very disappointing." It said Pringles had "attracted considerable interest from other outside parties."
After Diamond and P&G agreed to part ways, Kellogg stepped in. The Michigan-based food giant already is a major player in the breakfast world, with brands such as Eggo, Froot Loops, Frosted Flakes and Raisin Bran.
But Pringles will help Kellogg, whose portfolio also includes Cheez-It, better challenge competitors such as Kraft Foods Inc. in the snack arena.
The deal Wednesday pushed Kellogg's stock up more than 5% to $52.87 while advancing P&G's stock about a tenth of a percent to $64.55.