After a long research and investigation, Procter & Gamble has announced it sells its Pringles brand to Kellogg for $2.7 billion in cash. The deal is expected to be completed in summer 2012. Last year P&G intended to sell the chips brand to Diamond Foods but the agreement has been mutually terminated.
With the sale of the Pringles business, P&G expects an after-tax gain on the transaction in the range of $1.4 billion to $1.5 billion, or approximately $0.47 to $0.50 per share. The sum is almost the same as was estimated in case of the deal with Diamond Foods.
Kellogg’s goal is to develop a global snacks business along with its cereal brands, that’s why the purchase of Pringles is a good strategic move for Kellogg. The advertising agency for Kellogg brands is Leo Burnett.
P&G’s Chairman, President and Chief Executive Officer, Bob McDonald, commented: “This is an excellent development for P&G, Pringles and Kellogg, creating value for our shareholders and representing an outstanding opportunity for Pringles employees with a leading company in the Food sector. Kellogg shares similar values and principles to us and we are confident that the Pringles business will thrive under Kellogg’s leadership.”
McDonald added that Pringles, with global sales estimated at $1.4 billion, will become Kellogg’s second-largest global brand, after Special K.
P&G has also updated its financial guidance for fiscal year 2012. Besides the transaction profit, diluted net earnings per share are expected to be in the range of $3.30 to $3.43. If the companies manage to complete the Pringles sale within the current fiscal year, diluted net earnings per share is expected to be in the range of $3.77 to $3.93, including the one time gain of $0.47 to $0.50 per share.