What do Frosted Flakes, Keebler, Cheez-It, and Special K chips have in common? They are all a part of the Kellogg family, which will soon include the Pringle brand as well. Originally, Procter and Gamble Co. were going to sell the Pringles brand to Diamond Food Inc. for $1.5 billion. However, an investigation into Diamond Foods Inc. showed that there had been improper payments to walnut growers. The CEO and CFO were thus replaced, and Diamond stock slid considerably, impeding the company’s ability to finance the deal. The sale would have made Diamond, which produces Emerald nuts and Pop Secret popcorn, the second largest snack-maker in America.
In its stead, Kellogg will be purchasing the Pringles brand for $2.7 billion, a deal Kellogg expects to complete by June 30. The reason for this expensive acquisition is that Kellogg wants to “become as big globally in snacks as it is in cereal,” according to CBS news. I can personally attest to Kellogg’s popularity when I see Israelis purchasing 36 NIS (shekel) boxes of Special K and Froot Loops. Their goal is to have that same foothold in the global snack arena. With the attainment of the savory Pringles brand, they hope to accomplish this.
Upon completion of the purchase, CEO of Kellogg John Bryant anticipates that Kellogg’s debt will increase by $2 billion. To allow them to reduce their debt, Kellogg will limit stock buybacks for 2 years.
So, what did I learn from these current events? (1) The importance of a good accounting team. (2) Nuts are a lot more popular than I had originally thought. (3) Kellogg is more than just cereal; it is a way of life. Well, maybe it’s more like a way of snacking throughout the day. Nevertheless, I’m sure Kellogg will hold a much greater presence in most of our lives than it previously had. For $2.7 billion, it had better.
source:
http://www.cbsnews.com/8301-505245_162-57378127/kellogg-to-buy-pringles-p-g-diamond-end-deal/
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