Diamond Foods to Purchase Kettle Foods

March 3rd, 2010

San Francisco, March 3, 2010 -- Diamond Foods, Inc. has entered into a definitive agreement to acquire Kettle Foods, makers of premium potato chips, from Lion Capital LLP for $615 million in cash.

Pursuant to the agreement, Diamond will acquire Kettle operations in both the United States and the United Kingdom. The transaction is structured as a purchase of all of the outstanding shares of a parent holding company of the U.S. and U.K. Kettle operating entities. It is expected to close by the end of Diamond's fiscal year 2010, subject to customary conditions, including regulatory approval.

Highlights of the transaction:

-- Significantly improves Diamond's strength: The Kettle Brand has been a strong performer in the premium potato chip category with an excellent growth profile and history of expanding profit margins. On a pro forma basis, the addition of Kettle Foods would add more than $250M in revenues and almost double Diamond's EBITDA.

-- Increases addressable market by $9B: The potato chip category is large and growing. Kettle operates in the two largest potato chip markets in the world, the U.S. and the U.K., which increases the company's addressable market by $9 billion.

-- Increases scale in snack market: The addition of Kettle Foods will more than double the size of Diamond's snack business, enabling cross-promotional opportunities in the U.S. across a diversified offering of three complementary brands: Emerald, Pop Secret and Kettle.

-- Adds premium brand to Diamond's snack portfolio: Kettle Foods pioneered the kettle-cooked style in 1982, setting an early standard in the premium and adult chip categories on two continents with its natural ingredients and commitment to flavor innovation.

Diamond expects the Kettle Foods acquisition will be accretive to earnings per share (EPS) in fiscal 2011 after accounting for increased marketing support and financing costs and excluding costs associated with the transaction and integration.

The purchase is expected to be funded partially with a new five-year $600 million credit facility, a future equity offering and available cash resources. Assuming the transaction closes prior to the beginning of fiscal 2011, the company is expecting full year EPS to be in the range of $2.25 to $2.35.

Both companies share a heritage in the nut industry, with Kettle Foods getting its start in roasted nuts and nut butters, and expanding to build Kettle Brand Potato Chips, a highly respected brand in the premium potato chip category. Its products are made with delicious blends of all natural seasonings and cooked in small batches in pure, healthy oils. Kettle Brand Potato Chips are recognized for their hearty crunch and golden color. Kettle products are sold in natural supermarkets, traditional grocery, club, mass merchandisers, food service and convenience channels.

In addition to 28 flavors of all natural potato chips, such as Sea Salt and Fresh Ground Pepper, Backyard BBQ, Spicy Thai, and Sea Salt and Vinegar, the company's product lines also include "better-for-you" Kettle Brand Baked Potato Chips, "the only baked potato chip made from real, whole slices of potatoes, available in four delicious flavors."