The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Kelloggs gets into the Potato sacks| Deal Insight

SAN FRANCISCO, CA - APRIL 05:  Packages of Pri...

Image by Getty Images via @daylife

Pringles full, that is. Kelloggs bid up the P&G potato snacks division to $2.7 bln and snagged the extra order of extra thin crispies, unloaded in the nick of time in front of Diamonds Foods offices and whisked away to Lady K headyuarters by the superpowers the cereal maker innately built in Special K sales…jesus the way the deals keep popping after a bad year, it’s not so easy to keep your Empire State Building private.

Kelloggs’ CEO John Bryant must be really happy in the back field having made a good return touchdown after Diamond already assimilated Kettle and Pop Secret brands. The Niners’ mus be said to see another from Frisco hit the dust.

Diamond Foods was caught in an accounting malpractice whorl and decided to take time off to restate iuts last two years financials, whence P&G gave it away with the complimentary snack tray packaging. According to the guys with the press release lead, the brand sales are $1.5 bln a year. Diamond Foods had also announced the deal and then hedgies walked into a short on the company and asked uncomfortable questions from it about the Walnut sellers it supports. The Q1 deal means immediate accretive earnings.

The lawyers on the deal have been often heard ( Wachtell, Lipton and aren’t the lawyer partnerships getting loud in the press releases outside the industry now ( lawyering industry the myopic field)  Morgan Stanley on behalf of the seller and BarCap on behalf of the buyer walked away with a potential $200 mln in fees.

Kelloggs plated a $3.38 earnings for the year, mamanging only a $0.64 cents on the Holiday quarter even as Pepsico resists  divesting its snacks division. Just Pringles full years sales would take Kelloggs from $13.2 bln in 2011 to $16 bln in 2012, the comapny has reduced its interest costs over the last few years and the $1.2 bln earnings would finally grow with the new brand adding strength to Cheez it and Keebler. The company’s sales from Q2 onwards will likely remain above the $4 bln, unknown to us yet why it dips so  low in December

The company claimed $800 mln from innovation sales in 2011 and has promised brand building investments in its guidance, the Profits from Pringles tiding it over the inflation rump as well will be a challenge the company management could expect. The company’s degrading op margins were attributed to supply chain costs like putting people back in plants and logistics, leading to a loss of 140 bp at 41.3%


Enhanced by Zemanta

One comment on “Kelloggs gets into the Potato sacks| Deal Insight

  1. Pingback: The Deal Economy: BATS listed, CBOE investigated, AIG Criticised, Deals net $4 bln! | Deal Insight | The Banking and Strategy Initiative

Comments are closed.


%d bloggers like this: