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.
Ending the agreement may leave P&G searching for a new buyer for Pringles, known for stackable chips in flavors from loaded baked potato in the U.S. to green seaweed in China. The snack business is growing, with scant private-label competition, said Ali Dibadj, an analyst at Sanford C. Bernstein & Co.
“It’s an attractive category,” Dibadj, who’s based in New York, said in an interview. “There may be many buyers out there, both in snacks and in food.”
P&G fell 0.3 percent to $63.88 at the close in New York. Diamond rose 1.7 percent to $23.52.
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.
P&G, based in Cincinnati, 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 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.
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.