An acquisitions deal between Diamond Foods, Inc. and Proctor and Gamble that has been dogged by an internal accounting probe and lawsuits, came to an official end Wednesday when The Kellogg Company stepped in and purchased the sought after Pringles snack brand.
Diamond Foods, which represents Diamond Culinary Nuts, Emerald Premium Snacks, Kettle Brand Potato Chips and Pop Secret popcorn, had been in talks with Proctor and Gamble to purchase the popular chip brand, but lawsuits filed late last year sidelined the deal.
The lawsuits filed in San Francisco Superior Court and the U.S. District Court in San Francisco accuse Diamond Foods of delaying payments to their walnut growers past the end of their fiscal year in an effort to bolster their finances. The lawsuits allege this practice misled investors to believe Diamond Foods had higher profits and lower expenses.
Part of the acquisition deal could have P&G shareholders exchanging some shares for Diamond Foods stock.
Diamond Foods disclosed the lawsuits Nov. 28, 2011, in a regulatory filing with the U.S. Securities and Exchange Commission.
The lawsuits were filed against the company and some of its executive officers. One such officer was Turlock resident Joseph P. Silveira, who died Nov. 15, 2011, at age 64. Silveira's death was ruled a suicide by the Stanislaus County Coroner's Office.
Both Diamond Foods and Proctor and Gamble released statements asserting the termination of the deal was "mutually agreed" upon.
"Diamond has enjoyed a positive and constructive working relationship with P&G throughout this process, and the mutual termination of our agreement and release of all associated liabilities was reached in the same spirit," said Rick Wolford, Diamond Foods' Acting President and Chief Executive Officer. "Diamond now will put its full effort on the growth of our business with focused execution to continue to build our successful brands."
In the wake of the lawsuits Diamond Foods initiated an internal audit and recently released reports showing that a $20 million payment to walnut growers in August 2010 and one for 460 million in September 2011 were "not accounted for in the correct periods."
"After an extensive and thorough investigation, the audit committee concluded that the company's internal controls were inadequate and that certain grower payments for the 2011 and 2010 crops were not accounted for in the correct periods. As a result, the company will restate its fiscal years 2010 and 2011 financial statements," Zollars said. "The board takes the company's control and the integrity of its financial statements very seriously, and we are moving aggressively to implement corrective measures, including changes to the company's leadership."
The discovery ushered in the departure of Diamond Foods chief executive officer and chief financial officer.
Diamond Foods said it will be restating its earnings to the Securities and Exchange Commission.
Diamond Foods is not affiliated with Blue Diamond Growers, which recently announced plans to open a facility in Turlock.
Kellogg's purchased Pringles in a $2.7 billion all cash transaction, according to Proctor and Gamble. The deal should be complete by this summer.
"This is an excellent development for P&G, Pringles and Kellogg, creating value for our shareholders and representing an outstanding opportunity for Pringles employees with a leading company in the Food sector," said Proctor and Gamble's Chairman, President and Chief Executive Officer, Bob McDonald. "Kellogg shares similar values and principles to us and we are confident that the Pringles business will thrive under Kellogg's leadership."