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Kellogg seals the lid on Pringles buy

By Kacey Culliney , 01-Jun-2012

Kellogg's hopeful that it can pop open Pringles globally
Kellogg's hopeful that it can pop open Pringles globally

Cereal giant, Kellogg, has sealed its buy-out of Pringles for US$2.7bn, set to triple international business and stack it into second place on the global snacks market.

The deal was confirmed in February with an EU Commission clearing passed at the beginning of May.

The move shifts Kellogg into a solid second position in the global snacks arena, although the sector’s number one - PepsiCo-owned Frito Lay - remains significantly ahead.

Rating standard agency Standard & Poor’s (S&P) said that while the move runs the risk of harming margins due to integration costs, it should diversify business and open it up to global markets.

“We estimate that the company’s international snack division will nearly triple in sales following the acquisition and international sales will increase to about 36% of combined company sales,” S&P said.

John Bryant, president and CEO of Kellogg, said that Pringles is a “tremendous platform for growth.”

“The addition of Pringles to our portfolio significantly advances the company’s strategic goal of building a global snacks business on par with our global cereal business and expanding our global footprint,” Bryant said.

Diversifying business

Bryant detailed that this buy should boost its North American snack business by US$500bn.

In terms of international markets, Asia represents Kellogg’s smallest – pulling in US$233m in sales for Q1 of 2012 compared to Latin America (US$270m) and Europe (US$538m).

Marcia Mogelonsky previously told this site that Kellogg’s Pringle deal will open up Asian markets for the firm. “This buy gives them a lot of room for global growth…It opens up Asian markets for Kellogg, where Pringles are popular and also increases distribution networks for Kellogg in markets beyond Asia (South America, for example).”

Pringles will sit alongside Kellogg’s other snack brands – Keebler, Cheez-It and Special K Cracker Chips. With more than 80 flavours, sold in more than 140 countries, P&G’s Pringles business is pegged at US$1.5bn.

Diamond Foods was in the bidding run for Pringles but its bid collapsed as it removed its CEO and CFO over improper accounting. Analysts had also bet on Kraft Foods as holding prime position for snapping up the snack firm.

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