February 15, 2012 5:44 PM
Wachtell Helps Kellogg Snap Up Pringles for $2.7 Billion
Posted by Tom Huddleston Jr.
It didn't take long for someone to snatch Pringles off the table.
Kellogg Co. said Wednesday that it will pay $2.7 billion in cash to acquire Procter & Gamble's Pringles unit. The move comes less than a week after P&G announced that it was reevaluating the planned sale of the division to Diamond Foods for $2.35 billion amid an accounting scandal involving the latter company's financial statements for the past two years.
San Francisco–based Diamond announced Wednesday the termination of the agreement it signed with P&G last April, adding that there would be no breakup fees paid in connection with the scuttling of the deal.
Recent events suggest that, truly, the fun has stopped for snack maker Diamond, which fired its CEO and CFO last week and saw its stock price plummet after an internal probe found that some $80 million paid to walnut growers during 2010 and 2011 had been incorrectly reported, thereby inflating Diamond's revenue figures for those two years.
The New York Times's Peter Henning noted Tuesday that Diamond, which is in the process of restating its financial reports, is cooperating with investigations by the Securities and Exchange Commission and the U.S. Department of Justice. The company is still likely to face a civil enforcement action, according to Henning.
Presented with an opening, Kellogg—which expressed interest in buying Pringles last year, but failed to outbid Diamond—pounced, signing an agreement to acquire the unit in a matter of days. In announcing the acquisition, Kellogg said specifically that it plans to take advantage of Pringles's global footprint to increase the presence of its own products—including Pop-Tarts, Cheez-It crackers, and Keebler cookies—in the worldwide snack market.
Battle Creek, Michigan–based Kellogg's offer is higher than Diamond's was, in part to make up for tax breaks that the now-terminated deal would have provided, according to the Times. Kellogg will assume about $2 billion in debt as part of the deal and finance the rest with cash. Kellogg expects the deal to close by the end of June and to generate savings of $10 million in 2012, more the following year, and as much as $75 million annually in subsequent years.
Wachtell, Lipton, Rosen & Katz is advising Kellogg on the transaction, with a team led by New York corporate partners Daniel Neff and Benjamin Roth. Neff and Roth are being assisted by corporate partner Stephanie Seligman, compensation and benefits partner Adam Shapiro, real estate counsel Mark Koenig, restructuring, and finance partner Joshua Feltman. Partners Jodi Schwartz and T. Eiko Stange are advising on tax issues. Kellogg's general counsel is Gary Pilnick.
Neff also advised Kellogg on the acquisition of one of its top brands, Keebler Foods, in a $3.86 billion deal in 2000.
Jones Day, which had been representing P&G in connection with the proposed sale of Pringles to Diamond, is reprising its role as deal counsel to the Cincinnati-based household products giant. Global M&A chair Robert Profusek and M&A partner Randi Lesnick are leading Jones Day's team. As we have previously reported, P&G chief legal officer Deborah Majoras—the former chair of the Federal Trade Commission—is a former antitrust partner at Jones Day and the firm has handled plenty of deal work for the company. In 2008, Profusek advised on P&G's $3.3 billion sale of Folger Coffee Company to The J.M. Smucker Company.
Fenwick & West had been advising Diamond on the now terminated deal, while Gibson, Dunn & Crutcher was hired by Diamond in November to advise the audit committee conducting the company's internal probe, according to our prior reporting.Make a comment