Kellogg’s Nabs Pringles (K, PG, DMND)

Cereal maker Kellogg Co. (NYSE: K) has offered $2.7 billion for the Pringles business of Proctor & Gamble Co. (NYSE: PG). The offer follows hard on the heels of the withdrawal of a similar offer from Diamond Foods Inc. (NASDAQ: DMND) that was derailed by a federal investigation of the snack food maker’s accounting practices and the firing of Diamond’s two top executives.

Kellogg’s offer is expected to generate about $1.4-$1.5 billion in after-tax proceeds, about what P&G expected from the proposed deal with Diamond. The agreement between Kellogg and P&G is for an all-cash transaction once the deal passes regulatory review. Kellogg expects to take a hit of $0.11-$0.16 to its EPS this year and to incur an additional $2 billion in debt.

Kellogg’s shares are up more than 5% on the news, at $53.00 in a 52-week range of $48.10-$57.70. P&G’s shares are up 0.11% at $64.55 in a 52-week range of $57.56-$67.72. Diamond’s shares are up more than 4% at $23.27 in a 52-week range of $21.41-$96.13.

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