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Diamond Foods, Inc. (DMND) Message Board

  • sirwallst sirwallst Feb 14, 2013 3:44 PM Flag

    Kellogg CEO: Diamond Foods ‘clearly a fit’ for cereal maker

    “They’re clearly a fit in the portfolio,” Kellogg CEO John Bryant told Reuters. “You could say our ability to do bolt-on acquisitions has probably expanded with the addition of this business.”
    Not that Kellogg’s doesn’t have its hands full with the Pringles deal and unrelated quality-control problems that the company is now tackling.
    But Diamond’s Emerald Nuts and Kettle chips are growing faster than the Pringles business, which would give a lift to Kellogg’s (NYSE: K) newly expanded snack-food business.
    “We think this could move Diamond closer to a buyout from Kellogg,” Timothy Raney, an analyst with D.A. Davidson, told clients this morning.
    “Pringles has had a ‘mid-single digit’ growth rate over the past few years and would not enhance the growth rate of the Kellogg’s existing portfolio of low-growth brands,” Raney said. “Emerald and Kettle, however, are young, new brands with high consumer awareness, increasing market share and meaningful earnings potential.”
    “Unlike Pringles, Emerald and Kettle have direct-store-delivery distribution and would be synergistic on Kellogg’s existing distribution routes,” Raney said. (Former Dreyer’s Grand Ice Cream CEO Gary Rogers credited that company’s direct-store deliveries as a key element of turning the regional ice cream brand into a national player.)
    Raney said the termination of the Pringles deal with Diamond helps resolve some uncertainty. And he feels re-negotiating debt covenants with lenders “could be as easy as one meeting.”

    Sentiment: Strong Buy

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