Kellogg to buy P&G’s Pringles for $2.7bn

US-based cereal maker Kellogg has entered into an agreement to buy potato and wheat-based snacks brand Pringles from Procter & Gamble (P&G) for $2.695bn, as part of its strategy to strengthen its snack business.

The acquisition will not only complement Kellogg’s snacks brands, including Keebler, Cheez-It and Special K Cracker Chips, but is also expected to nearly triple its international snack business.

The deal will give Kellogg control over two manufacturing plants in Tennessee, US, and Belgium.

Kellogg president John Bryant says the company is excited to announce this strategic acquisition.

"Pringles has an extensive global footprint that catapults Kellogg to the number two position in the worldwide savoury snacks category, helping us achieve our objective of becoming a truly global cereal and snacks company," Bryant added.

Kellogg plans to fund the all-cash deal through banks loans, cash on hand and money held by its overseas subsidiaries.

Previously, P&G agreed to sell Pringles to Diamond Foods for $2.35bn in April but was forced to re-evaluate the agreement after Diamond began facing criticism over questionable payouts to its walnut farmers.

The agreement was terminated this month after Diamond said that it needed to restate its financials for 2010 and 2011 and put its chief executive and chief financial officer on administrative leave.

P&G, which will be completely exiting the food business after divesting the Pringles brand, plans to focus on beauty and personal care products business.

Pringles is the second-largest brand in the savoury snacks segment, just behind PepsiCo’s Frito-Lay division, with $1.5bn in sales across more than 140 countries and manufacturing plants in the US, Europe and Asia.

The all-cash deal transaction is expected to be completed in the summer of 2012, and is subject to necessary regulatory approvals.

Caption: After divesting the Pringles brand, P&G will completely exit the food business to focus on beauty and personal care products. Photo: P&G