P&G May Back Out of Pringles Deal

A MAC attack may sink Procter & Gamble’s Pringles sale to Diamond Foods. P&G has the right to terminate the acquisition, now that Diamond has replaced its key executives and will restate its financial results for two years. Those moves by Diamond constitute a real-life material adverse change, or MAC, giving P&G the right to terminate the acquisition.

A MAC is a clause placed in takeover agreements that allows a buyer to walk away if a material adverse change happens to the target company during the time a deal is announced and completed. Courts have interpreted MACs strictly, and a MAC is notoriously hard for a buyer to claim.

But the announcement that Diamond Foods will restate its earnings almost certainly meets the high threshold for a MAC, according to observers.