The acquisition of crisp maker Kettle Foods has “transformed” the business of US snack firm Diamond Foods, an analyst has claimed.
Diamond last night (25 February) said it had struck a deal to buy Kettle from private-equity firm Lion Capital for US$615m.
The nut maker, which claims to be the US’s leading exporter of walnuts to Europe and the Pacific Rim, owns the popcorn brand Pop Secret but one analyst said the acquistion of Kettle would make the business one of the leading snack players in the country.
“This is a big transformative acquisition for Diamond Foods as it takes the company from a hybrid commodity-nut, branded snack-nut company to a full-fledged CPG foods business with two-thirds of revenue coming from branded snack foods business,” Mark Argento, senior research analyst at Craig-Hallum Capital Group said.
In a note to clients published today, Argento said Diamond had “paid up” for Kettle, with the deal valuing the premium crisp business at 10x EBITDA on a trailing twelve months basis.
However, Argento insisted the company would benefit from cost cuts and high-level marketing and product development.
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By GlobalData“While the company is paying up for the asset, we expect that synergies will ultimately benefit the incumbent snack businesses at Emerald and PopSecret as best of breed marketing, product development, manufacturing, and distribution will help shape future growth of the portfolio,” Argento said.
Upon announcing the deal, chairman, president and CEO Michael Mendes said Kettle was a “strong, strategic fit” to Diamond.
Argento said the acquisition would make Diamond “a premier player” in the snack category but added that the deal could result in the company “becoming an acquisition target in and of itself as it builds a high-value portfolio”.