Diamond Foods Acquiring Kettle Foods

Press enter to search
Close search
Open Menu

Diamond Foods Acquiring Kettle Foods

Diamond Foods, Inc. has entered into a definitive agreement to acquire the U.S. and U.K. operations of premium potato-chip maker Kettle Foods from London-based investment firm Lion Capital, LLP for $615 million in cash. Expected to close by the end of Diamond’s fiscal year 2010, the transaction will be funded partially with a new five-year $600 million credit facility, a future equity offering and available cash resources.

“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,” noted Michael J. Mendes, chairman, president and CEO of San Francisco-based Diamond. “Diamond and Kettle Foods share a history of relentless focus on flavor 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. We expect that the acquisition will be accretive in the first year and is a strong, strategic fit to better support our long-term growth plans.”

Added Lion Capital partner Lyndon Lea: “Since [Lion’s] acquisition [of Kettle] in 2006, we have dramatically increased [the company’s] strategic value through category-leading innovation and penetration gains in the U.S. and U.K. snacking markets, leading to double-digit annualized growth in group revenues and 30 percent annualized growth in group profitability. In the U.S., we doubled the capacity of the business through investment in a new manufacturing plant in Wisconsin, which supported even higher rates of profit growth within the U.S. market.” Lea said that Diamond Foods’ “heritage of delivering the consumer premium snacking products and market-leading innovation complements the core tenets of Kettle Foods.”

Among the expected benefits of the deal is that it will improve Diamond’s strength significantly, adding more than $250 million in revenues and almost doubling the snack maker’s EBITDA; increase the company’s addressable market by $9 billion, as Kettle operates in the two largest potato chip markets in the world, the United States and the United Kingdom; more than double the size of Diamond’s snack business, enabling cross-promotional opportunities in the United States across a diversified offering of the complementary Emerald, Pop Secret and Kettle brand; and transfer the premium Kettle potato chip brand to Diamond’s snack portfolio.

“We have taken a very deliberate approach toward screening possible acquisitions, focused on premium brands with growth potential that have synergy with the customer segments we already serve,” noted Mendes. “We believe Kettle Foods is a strong fit with the capability to provide solid financial returns for our shareholders, and we plan to invest behind the brand in several areas to position it for long-term success.”

According to Tim Fallon, president of Salem, Ore.-based Kettle Foods North America, who presided over the company’s double-digit growth over the past several years and will continue to head its U.S. operations: “[Diamond] is a company with a history of investing in new product development and creative marketing, which will only amplify the work we’re doing to attract new customers and innovate in the premium category.”

“While Diamond Foods has a long history of international sales, Kettle’s strong retail and operational foundation in the United Kingdom offers Diamond a platform, led by Kettle Chips, for expanding in the U.K. and Europe,” observed Jeremy Bradley, the managing director of Kettle’s U.K. business.

Both companies share a background in the nut industry, with Kettle Foods getting its start in roasted nuts and nut butters, and expanding to offer Kettle Brand Potato Chips.