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Diamond Foods to Buy Kettle Foods for $615m

(Reuters) – Nuts and snacks seller Diamond Foods Inc (DMND.O) said it agreed to buy potato-chips maker Kettle Foods from Lion Capital LLP for $615 million in cash, to expand its presence in the growing potato chip market.

The acquisition, expected to close by the end of Diamond Food’s fiscal year ending July 2010, will be funded through a new five-year $600 million credit facility, an equity offering and available cash, the company said in a statement.

Diamond expects the deal to add to earnings in fiscal 2011 and add more than $250 million in revenue.

Assuming the transaction closes before the fiscal year 2011 begins, the company expects full-year earnings of $2.25 to $2.35 a share.

Diamond Foods also reported second-quarter earnings that edged past estimates, helped by strong snack demand.

The company also raised its full-year outlook and now expects earnings per share of $1.79 to $1.83 a share on net sales of $595 million to $610 million.

Analysts on average were expecting the company to earn $1.83 a share on revenue of $597.3 million.

Shares of the company closed at $38.71 Thursday on Nasdaq. (Reporting by Abhishek Takle in Bangalore; Editing by Unnikrishnan Nair)