Procter & Gamble has terminated the planned sale of its Pringles snacks business to Diamond Foods and will instead sell it to Kellogg in a $2.7bn all-cash transaction.

On Wednesday, P&G, the world’s largest consumer goods group by sales, ended protracted uncertainty over the future of Pringles – its last remaining food business – by saying it would sell it to Kellogg, which will use it to triple the size of its international snacks business.

The planned sale to Diamond Foods, a stock-based deal worth $2.35bn including debt unveiled in April, had been in doubt since Diamond announced an internal investigation into its own accounting in November.

Last week, the investigation led to Diamond’s board ousting its chief executive and chief financial officer and saying the company would restate two years of earnings.

John Bryant, Kellogg’s chief executive, said: “Pringles has an extensive global footprint that catapults Kellogg to the number two position in the worldwide savoury snacks category, helping us achieve our objective of becoming a truly global cereal and snacks company.”

Pringles has annual sales of $1.5bn and will become Kellogg’s second largest brand after Special K cereal.

Mr Bryant said on a conference call that Kellogg had been interested in acquiring Pringles last year, but that it was hard to compete with Diamond’s offer.

Analysts suggested Kellogg was the better fit for Pringles after all.

“We had been worried that if Diamond owned Pringles it would be an unprotected orphan brand overseas,” said Alexia Howard, analyst at Bernstein Research. “The Pringles acquisition provides a ready-made international snack distribution platform, presumably with deeper distribution into snacking distribution channels than cereals.”

Kellogg, which also owns Cheez-It crackers, said that the transaction would increase its outstanding debt by about $2bn. The company said it would enjoy tax benefits from the deal and would have a new avenue for deploying cash internationally.

P&G, which had been searching for a buyer for Pringles for several years, said it expected the transaction to yield an after-tax gain of $1.4bn-$1.5bn, or 47-50 cents a share.

The company’s latest earnings guidance for the current fiscal year had included an estimated gain of 55-65 cents a share from the Diamond transaction.

In the planned sale to Diamond, which used a structure known as a Reverse Morris Trust, P&G shareholders were given the option of exchanging some P&G stock for shares in a new entity that combined Diamond and Pringles.

“The advantage of this [Kellogg] deal at this time is that with a cash transaction it gets done very quickly,” said Bob McDonald, P&G chief executive. He added that P&G would not pay any break-up fee.

The companies expect to complete the deal this summer. Shares of Kellogg rose 5.03 per cent to $52.83 in early trading. P&G shares slipped 0.5 per cent to $64.45.

Morgan Stanley advised P&G, while Barclays Capital advised Kellogg.

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