P&G Pringles Deal in Jeopardy
Diamond Foods names new CEO, CFO after investigation finds improper accounting
SAN FRANCISCO -- Diamond Foods Inc. is replacing its CEO and CFO after an internal investigation found that the company improperly accounted for payments to walnut growers and it needs to restate two years of financial results, said a report by the Huffington Post.
The deal could put Diamond Foods' plans to acquire the Pringles brand from Procter & Gamble Co. in jeopardy. The deal, worth $1.5 billion when it was announced in April, would be the biggest acquisition ever for Diamond Foods and make it the second-largest snack maker in the nation behind PepsiCo Inc.
The news, announced late Wednesday, sent shares of the San Francisco-based company plummeting more than 43% in after-hours trading. The collapse of Diamond Foods' shares hurts its ability to finance the deal.
Diamond Foods, which makes Kettle Chips, Emerald Nuts, Pop Secret popcorn and Diamond of California snack and culinary nuts, has been embroiled in a dispute over the payments for several months. The company said that its audit committee found that the payments were booked in the wrong period.
The payments--an estimated $20 million in 2010 and $60 million in 2011--skewed the company's financial results.
Diamond Foods placed its CEO Michael Mendes and CFO Steven Neil on administrative leave, said the report, and the company is looking for permanent replacements.
In the meantime, it appointed Rick Wolford, a Diamond Foods director and former CEO of Del Monte Foods, as its acting CEO. Michael Murphy, of Alix Parners, will serve as acting CFO.
Cincinnati-based P&G called the news from Diamond Foods "very disappointing." It said in a statement that it is evaluating its next steps and keeping all its options open.
"Pringles remains a valuable asset and it has attracted considerable interest from other outside parties," P&G said.
Diamond Foods said it takes the integrity of its financial statements seriously and is working to complete the restatements as soon as possible.