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Diamond Foods to acquire Kettle Foods from Lion Capital

Diamond Foods has entered into a definitive agreement to acquire potato chips maker Kettle Foods from Lion Capital for USD615m in cash.

Pursuant to the agreement, Diamond will acquire Kettle operations in both the US and the UK.

The transaction is structured as a purchase of all of the outstanding shares of a parent holding company of the US and UK Kettle operating entities.

It is expected to close by the end of Diamond’s fiscal year 2010, subject to customary conditions, including regulatory approval.
“Kettle Foods’ passion for making great tasting, natural potato chips has attracted a loyal consumer following and shaped a truly premium brand that has our deep respect,” says Michael J. Mendes, chairman, president and chief executive of Diamond Foods. “Diamond and Kettle Foods share a history of relentless focus on flavour and product quality and working collaboratively with our retail partners. 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.”
Lyndon Lea, partner of Lion Capital, adds: “Our successful ownership of Kettle Foods reflects Lion’s distinctive strategy of investing in and growing strong consumer brands. Since our acquisition in 2006, we have dramatically increased Kettle’s strategic value through category-leading innovation and penetration gains in the US and UK snacking markets, leading to double-digit annualized growth in group revenues and 30 per cent annualized growth in group profitability.”
Diamond expects the Kettle Foods acquisition will be accretive to earnings per share in fiscal 2011 after accounting for increased marketing support and financing costs and excluding costs associated with the transaction and integration. The purchase is expected to be funded partially with a new five-year USD600m credit facility, a future equity offering and available cash resources. Assuming the transaction closes prior to the beginning of fiscal 2011, the company is expecting full year EPS to be in the range of USD2.25 to USD2.35.

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