News surfaced Wednesday that Kellogg Company (NYSE:K) will purchase the Pringles potato chip brand from The Procter & Gamble Company (NYSE:PG) for $2.7 billion. As the two companies announced their tentative agreement, parties from both P&G and Diamond Foods Inc. (NASDAQ:DMND) correspondingly announced the termination of their negotiations for the sale/purchase of Pringles which had hit a speed bump in 2011 due to a federal probe into the accounting practices of Diamond Foods.
Shares for Kellogg Company surged more than 5 percent during Wednesday’s stock market trading session to $52.89 by 1:20pm Eastern Time while Diamond Foods Inc.’s stock was trading at $23.37 – a 4.85% increase from Tuesday’s market close.
What Pringles Offers
The Pringles brand offers canned potato chips in a variety of flavors and categories including multi-grain, 100 calorie, Grab & Go and reduced fat. The brand is currently calculated under P&G’s Snacks and Pet Care Division. According to Procter & Gamble’s 2Q Fiscal Year 2011 Earnings Report, net sales and organic sales increased three percent to $824 million on a two percent increase in unit volume while pricing increased net sales by three percent. Snacks volume increased mid-single digits mainly due to increased distribution and market growth in developing regions.
Stock Charts
Below are the intraday stock charts for Kellogg Company and Diamond Foods. Shares for Procter & Gamble were relatively unchanged Wednesday.
Kellogg Company
With the anticipated purchase, Kellogg Company is seeking to improve its global market position in snack foods. The stock has a dividend yield of 3.25% and a Market Capitalization of $18.88 billion along with an annualized Earnings Per Share of $3.38.
Kellogg’s 4Q and Full Year 2011 Earnings published February 2nd showed the food maker achieved Fourth Quarter sales of $3 billion with earnings of $397 million, or $0.64 per share. For the Full Year 2011, Kellogg Company had $13.2 billion in sales with nearly $2 billion of that reported as profit. However, the 2011 Full Year earnings numbers were 2.9% less than 2010 with annualized Earnings Per Share unchanged versus the previous year.
CEO Statements
Kellogg Company released an official statement Wednesday on the pending purchase. President and CEO John Bryant told investors, “We are excited to announce this strategic acquisition. Pringles has an extensive global footprint that catapults Kellogg to the number two position in the worldwide savory snacks category, helping us achieve our objective of becoming a truly global cereal and snacks company. We are delighted to welcome the employees of the Pringles organization to Kellogg. Their collective passion and commitment has resulted in Pringles’ well-deserved acclaim as one of the most recognized brands in the world.”
P&G’s Chairman, President and Chief Executive Officer Bob McDonald added, “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.”
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