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Diamond Foods, Inc. (DMND) Message Board

  • wooglin_kai wooglin_kai Oct 25, 2011 11:14 AM Flag

    S.A. Deal's Potential Pitfalls

    Looks like a few people have read the Seeking Alpha article that discusses the deal's potential pitfalls and are acting--compared to the other S.A. article re advertising.

    "According to P&G, Pringles has earned about $150 million in income on $1.45 billion in revenue last year. However, that net income excludes the cost of debt interest, which could cost Diamond about $50 million a year on the $850 million in debt taken on for the deal. This interest expense would reduce Pringles income by a third, to $100 million, and would give Pringles a P/E of about 22 when consolidated into Diamond’s earnings."

    "Diamond currently has only $6 million in cash and marketable securities on its balance sheet, and post acquisition, this company will have one of the highest debt to cash ratios in the Russell 2000."


    This last quote is intriguing:

    "Also problematic is that Pringles earns well over half its income abroad, a non-issue for P&G, but Diamond will likely struggle with cash balances without repatriating some cash. This repatriation would lead to a heavy tax burden unless the tax law changes."

    http://seekingalpha.com/article/301697-why-diamond-foods-pringles-acquisition-is-risky?source=yahoo

 
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