Diamond Foods Inc. (DMND), the maker of Kettle potato chips and snack nuts, had the biggest decline in almost three years after saying the $1.5 billion acquisition of Pringles chips would close later than expected.
The shares slid 18 percent to $52.79 at the close in New York, the largest drop since December 2008. The San Francisco- based company’s shares had risen 21 percent this year before today.
The purchase of Pringles from Procter & Gamble Co. (PG) is now scheduled to be completed in the first half of 2012, instead of December, because the board is investigating the accounting for payments made to walnut growers, the company said yesterday in a statement.
“Because this issue has begun to disrupt the normal course of business, the burden of proof has changed from our perspective,” Ed Aaron, an analyst at RBC Capital Markets in Denver, said in a note to clients today. “The fact that it’s delaying the close of this deal suggests that it’s probably not a cut-and-dry issue as we first believed.”
Diamond may have to restate fiscal 2011 earnings to reflect the payments made to the growers, Aaron said. He said it likely wouldn’t prevent P&G from following through with the deal. Aaron downgraded Diamond shares today to “sector perform.”
John Christiansen, a Diamond spokesman who works for Sard Verbinnen & Co., declined to comment beyond the statement.
Diamond Chief Executive Officer Michael Mendes agreed to buy Pringles from P&G in April to more than triple the size of its snack business.
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