Money Matters - Simplified

Diamond Foods acquires Kettle Foods for $615 mn

Diamond said the acquisition will add $250 million to its annual revenue. For 2009, Diamond had annual revenue of $560 million.

Kettle Food Inc. will soon be acquired by Diamond Foods for $615 million. The latter is the seller of Emerald nuts and Pop Secret popcorn.

Diamond will be buying Kettle’s U.S. and UK operations from Lion Capital LLP.

The deal, expected to close by fiscal year 2010, will be a mixed one; consisting of cash, $600 million credit line, and a stock offering.

Diamond expects its profit to increase after the deal, mainly in the range of $2.25 to $2.35 per share.

“We have taken a very deliberate approach toward screening possible acquisitions, focused on premium brands with growth potential that have synergy with the customer segments we already serve,” said Diamond’s CEO Michael J. Mendes.

“We believe Kettle Foods is a strong fit with the capability to provide solid financial returns for our shareholders, and we plan to invest behind the brand in several areas to position it for long-term success.

“Profitability benefited from greater Emerald sales, an improved mix of Diamond culinary and in-shell sales, and a later walnut crop this year than last, which shifted sales of nonretail products from the first fiscal quarter to the second,” said Mendes.

Diamond to have market share worth $9 billion
Based in San Francisco, Diamond Foods is expected to boast a market share worth $9 billion after the takeover.

Mendes said the company is on an expansion spree. In Sept. 2008, the company bought General Mills Inc. for $190 million.

The Kettle Foods acquisition will add $250 million to the company’s annual revenue. For 2009, Diamond had annual revenue of $560 million.

Diamond had net sales of $184.17 million for the fourth quarter. The company expects its total sales in 2010 between $595 million - $610 million.

Shares of Diamond Foods declined 53 cents in Nasdaq Stock Exchange. The stock has gained about 8.9 percent this year.

About Kettle Foods
Founded in Salem, Kettle Foods was later expanded to UK in 1989. It has factories in Beloit, Norwich, and Salem.

In 2008, Kettle had sales of $235 million, according to Lion Capital’s Web site. According to Lyndon Lea, a partner in the private equity firm, Kettle’s revenue grew in double-digits for 2009 while profits rose by 30 percent.

“By adding Kettle, including its talented team of employees, our snack business will have greater scale, which will help us to drive even greater innovation in the snack market,” said Mendes.