Kellogg's crisp business as it snaps up $2.7bn Pringles

 

The cereals giant Kellogg is doing some crisp business with the $2.7bn (£1.7bn) acquisition of Pringles.

The deal adds the snack into a portfolio that already includes Kellogg's Corn Flakes, Rice Krispies, Special K and Cheez-It crackers.

Pringles brings in revenues of about $1.5bn, tripling the size of Kellogg's non-cereal snacks division and adding 1,700 new staff.

Kellogg becomes the world's No2 snack company after PepsiCo's Frito-Lay, owner of Walkers Crisps.

The company got a second chance to buy Pringles after the crisp brand's owner, Procter & Gamble, pulled out of a deal to sell to a different buyer, Diamond Foods, which has become embroiled in an accounting probe.

P&G said last week it would look elsewhere after Diamond suspended its chief executive and finance director and signalled it was not in a position to follow through on the acquisition.

Ken Perkins, analyst at Morningstar, said Pringles faced intense competition from other crisp brands.

"Pringles will be Kellogg's second largest brand and will give the firm a greater presence in the global snack category," he said.

Kellogg estimated it could cut $50m-$75m in costs out of the combined businesses and said it would add to the group's earnings from 2013.

It will borrow $2bn to complete the deal and expects to limit its share repurchase plan for about two years.

John Bryant, chief executive, said the cost was worth it to get his hands on "one of the most recognised brands in the world".

P&G shares rose 4 per cent yesterday on relief that it will finally be rid of its last remaining food business so it can concentrate on its other brands, which include Ariel washing liquid and Bounty kitchen towels. "Kellogg shares similar values and principles to us and we are confident that the Pringles business will thrive under Kellogg's leadership," P&G chief executive Bob McDonald said.

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