Procter & Gamble didn’t crunch the details on its Pringles partner adequately. Troubles escalated for Diamond Foods, the agreed buyer of the chips brand, on Thursday as the Securities and Exchange Commission initiated a probe into its accounting on the heels of the snack food company’s own internal inquiry. The scale of the issues being investigated suggests the consumer giant missed some warning signs.
Everything looked crisp back in April when the $2.4 billion transaction was announced. Diamond shares soared as it appeared to fulfill ambitions to grow from a walnut co-operative to a global player in salty treats. For P&G, a craftily-structured deal allowed it to finally exit the food business.
Things began crumbling in September amid growing questions, from Breakingviews and others, not only about the accounting treatment of payments to growers now under the microscope but other oddities involving the company’s finances and disclosures. Investors bet against Diamond shares. In November, the deal was put on hold.
Full story: Contents under pressure