Fenwick, Jones Day chip in on $2.35bn Pringles-Diamond foods deal

Diamond Foods, Inc. has agreed to merge with the Pringles unit of household products giant The Procter & Gamble Company in a deal worth $2.35bn, the companies announced Tuesday.

In the transaction, P&G is to receive some 29 million shares of Diamond common stock worth $1.5bn, which will comprise 57% of the merged entity. At the same time, San Francisco–based Diamond--whose brands include Pop Secret popcorn and Emerald nuts--will assume $850 million in Pringles debt, giving Diamond shareholders a 43% stake in the merged company.

Diamond is being advised on the transaction by the co-chair of Fenwick & West's M&A group, partner Douglas Cogen. He is joined by corporate partners David Michaels and Scott Spector; tax partner Michael Solomon; IP partners Lisa Kenkel, Stuart Meyer, and Connie Ellerbach; and technology transactions partner Mark Ostrau.

Cogen has led on a number of past transactions for Diamond, including its $190m acquisition of Pop Secret, in 2008, and its $615m purchase of Kettle Foods, last year. Stephen Kim is general counsel for the company.

Jones Day is representing P&G on the deal with a team led by New York partner Robert Profusek, global chair of the firm's M&A practice. Joining him are M&A partners Randi Lesnick and Luc Houben; capital markets partners Timothy Melton and Bradley Brasser; executive compensation partner Manan "Mike" Shah; finance partner Vanessa Spiro; antitrust partners Kathy Fenton and Johannes Zoettle; and IP partner Thomas Briggs.

Cincinnati-based P&G has turned to Jones Day for plenty of deal work in the past, including in 2008, when Profusek advised on the company's $3.3bn sale of Folger Coffee Company to The J.M. Smucker Company. That deal came about shortly after the arrival at P&G of general counsel Deborah Majoras, a former antitrust partner at Jones Day and former chair of the Federal Trade Commission.

The transaction creates a company with combined annual net sales of $2.4bn and annual earnings of about $400m.

In the companies' announcement, P&G described the deal as a "split-off" transaction, in which the company's shareholders would have the option of exchanging P&G shares for shares of Diamond. P&G would then create a separate holding entity for the Pringles unit that would be distributed to participating P&G shareholders.

Depending on the fluctuations of its stock price, the companies statement said that Diamond could ultimately assume as much as $200m more, or $150m less, debt. The deal is expected to close by the end of 2011.

(Published by The Am Law Daily - April 5, 2011)