"Kettle Foods' [image-nocss] 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," said Michael J. Mendes, chairman, president and CEO of Diamond Foods. "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."
Lyndon Lea, partner of Lion Capital, said, "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 U.S. and U.K. snacking markets, leading to double-digit annualized growth in group revenues and 30% 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."
According to the company, the transaction significantly improves Diamond's strength. On a pro forma basis, the addition of Kettle Foods would add more than $250 million in revenues and almost double Diamond's EBITDA.
The addition of Kettle Foods will more than double the size of Diamond's snack business, enabling cross-promotional opportunities across a diversified offering of three complementary brands: Emerald, Pop Secret and Kettle.
"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. 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," said Mendes.
Diamond expects the Kettle Foods acquisition will be accretive to earnings per share (EPS) 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 $600 million 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 $2.25 to $2.35.
Salem, Ore.-based Kettle Foods' products are sold in natural supermarkets, traditional grocery, club, mass merchandisers, food service and convenience channels. In addition to 28 flavors of all natural potato chips, such as Sea Salt and Fresh Ground Pepper, Backyard BBQ, Spicy Thai and Sea Salt and Vinegar, the company's product lines also include "better-for-you" Kettle Brand Baked Potato Chips, the only baked potato chip made from real, whole slices of potatoes, available in four delicious flavors.
Diamond Foods is a packaged food company focused on building, acquiring and energizing brands including Diamond of California culinary nuts, Emerald snack nuts and Pop Secret microwave popcorn. The company's products are distributed in a wide range of stores where culinary nuts and snacks are sold.
Kettle Foods products are distributed throughout North America, Japan, Guam and Western Europe. Its manufacturing sites in Salem, Ore., Beloit, Wis. and Norwich, United Kingdom produce more than 20 flavors and four varieties of potato chip offerings, nut butters and trail mixes. Its facility in Beloit, Wis., opened in 2007.
Lion Capital is a London-based investment firm that is recognized as a leader in investing in the consumer sector, with over EUR4 billion of equity capital invested in consumer businesses across Europe and North America. Lion's portfolio of market-leading food and beverage companies includes such well-known brands as Weetabix, the UK's number one cereal brand, Findus, Europe's second largest frozen food producer, and the Schweppes and Orangina beverage brands.
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