Pringles deal ‘dead’: Diamond Foods ditches top brass over shady walnut accounts
The Kettle chips and Emerald nuts maker has made interim appointments for both posts as premarket trading for Diamond plunged 40%.
Diamond removed CEO Michael Mendes and CFO Steven Neil after a three-month investigation from an Audit Committee of the firm’s Board of Directors found payments amounting to $80m to walnut growers were unaccounted for in the company’s financial results.
The Committee concluded that a $20m “continuity” payment to growers in August 2010 and a $60m “momentum” payment were improperly recorded when the company’s financial results were published.
Diamond said in a statement that it had “identified material weakness in the company’s internal control over financial reporting”.
It has said it will restate its results from fiscal years 2010 and 2011.
The decision to remove the heads came after the firm was issued a formal order of investigation from the US Securities and Exchange Commission (SEC) over its accounting last December.
Mendes and Neil have been placed on administrative leave from the company.
Since April last year, Diamond has been vying to buy snack firm Pringles from Procter & Gamble for $2.35bn.
Following the latest developments, market analysts said the deal had been compromised.
Mitchell Pinheiro of Janney Capita told Reuters the acquisition was “dead”, while SunTrust Robinson Humphrey’s described the deal as “over”.
Following Mendes’’ and Neil’s departure, the company has made interim appointments.
Former Del Monte Foods head Rick Wolford takes up the role as president and CEO while Michael Murphy of Alix Partners LLP takes the top financial post.
The company has also appointed ex-Lead Independent director Robert Zollars as chairman of the Board.