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Who Won in the Pringles Deal?

Matt Koppenheffer
April 6, 2011

Consumer goods giant Procter & Gamble (NYSE: PG  ) , advised by investment bank Morgan Stanley, was on one side. Up-and-coming snack slinger Diamond Foods (Nasdaq: DMND  ) , with Bank of America's Merrill Lynch in its corner, was on the other.

Up for grabs: Pringles and $2.35 billion.

So who ended up the winner in this salty snack deal? And, maybe more importantly, with the deal structure a relatively unusual one that will give P&G shareholders the option to swap their shares for Diamond shares, is it worthwhile for P&G investors to jump ship?

Let's dig in.

The price
Based on information that Diamond provided in a press release, combined with previous guidance issued by Diamond, I estimate Pringles is expected to show roughly $1.5 billion in revenue and $240 million in EBITDA during Diamond's 2011 fiscal year. With a total deal value of $2.35 billion, Diamond was buying (and P&G was selling) at 1.6 times revenue and 9.8 times EBITDA.

For sake of comparison, here is what comparable-company multiples look like.


Forward Revenue Multiple

Forward EBITDA Multiple

Kraft (NYSE: KFT  ) 1.6 9.3
Kellogg (NYSE: K  ) 2.0 10.3
Snyder's-Lance (Nasdaq: LNCE  ) 1.0 9.3
PepsiCo (NYSE: PEP  ) 1.9 9.5
Average 1.6 9.6

Source: Capital IQ, a Standard & Poor's company.

Apparently, the investment bankers were looking at a very similar set of comps. It would appear that the price was pretty fair for both sides, so it's tough to give an edge here.

Advantage: Neither

The strategy