Kellogg purchase of Pringles: A signal for more convergence between breakfast and snack foods sectors
Kellogg Company, the world’s leading breakfast cereal maker, has announced its strategic decision to acquire the Pringles business, currently owned by the Procter & Gamble Group. The acquisition price is said to be US $2.695 billion.
In a webcast on the morning of 15 February 2012, Kellogg Company’s CEO and president, John Bryant, announced that the purchase price is being funded with “international cash and approx $2 billion in debt at an attractive rate”.
Mr. Bryant expressed the importance of the acquisition for the Kellogg international snack business saying that Kellogg estimates the acquisition will “increase our snacks business in North America by more than 500 million dollars and will almost triple the size of our international snacks business”. He has also said that “Pringles has an extensive global footprint that catapults Kellogg to the number two position in the worldwide savory snacks category, helping us achieve our objective of becoming a truly global cereal and snacks company”.
As a well-established high-quality brand, Pringles shares a similar consumer appeal as other snack brands in the Kellogg’s range (including Keebler, Cheez-It and Special K Cracker Chips) and will be useful for Kellogg’s in leveraging its brands in the international snacks category.
With manufacturing operations in the US, Europe and Asia, Pringles has achieved sales of $1.5 billion in over 140 countries and is the fourth largest individual snacks brand internationally. The Pringles range has been a regular in supermarkets for more than four decades and is easily identified with its unique canister packaging and saddle shaped chip.
The acquisition is expected to be completed by June 2012, and is likely to expand Kellogg’s international production capabilities through additional manufacturing facilities in both Tennessee (USA) and Belgium. It will also more than 1700 Pringles employees to the Kellogg Company employee base. Kellogg says the employees will experience an untroubled changeover due to the similarities in history and culture between P&G and Kellogg.
Given the transaction closes around the anticipated date, Kellogg expects the acquisition will have a positive impact on share price and synergies. One-time costs are expected to be realized completely by 2014.