Diamond Foods Inc./quotes/comstock/15*!dmnd/quotes/nls/dmnd announced it has entered into a definitive agreement to acquire Kettle Foods, a manufacturer of premium potato chips that operates a large production plant in Beloit, from Lion Capital LLP for $615 million in cash.

Pursuant to the agreement, Diamond will acquire Salem, Ore.-based 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.

Kettle Foods' brands include 28 flavors of natural potato chips, including Sea Salt and Fresh Ground Pepper, Backyard BBQ, Spicy Thai and Sea Salt and Vinegar.

"In Diamond Foods, we are putting the Kettle brand in great hands," said Tim Fallon, president of Kettle Foods North America, who helped steer the company's double-digit growth over the past several years and will remain at the helm of the U.S. operations. "This is a company with a history of investing in new product development and creative marketing, which will only amplify the work we're doing to attract new customers and innovate in the premium category."

"Kettle Foods' passion for making great tasting, natural potato chips has attracted a loyal consumer following and shaped a truly premium brand that has our deep respect," said, Michael Mendes, chairman, president and chief executive officer of Diamond Foods. "Diamond and Kettle Foods share a history of relentless focus on flavor and product quality and working collaboratively with our retail partners. By adding Kettle, including its talented team of employees, our snack business will have greater scale, which will help us to drive even greater innovation in the snack market. We expect that the acquisition will be accretive in the first year and is a strong, strategic fit to better support our long-term growth plans."

Lyndon Lea, partner of London-based Lion Capital, said, "Our successful ownership of Kettle Foods reflects Lion's distinctive strategy of investing in and growing strong consumer brands. Since our acquisition in 2006, we have dramatically increased Kettle's strategic value through category-leading innovation and penetration gains in the U.S. and U.K. snacking markets, leading to double-digit annualized growth in group revenues and 30% annualized growth in group profitability. In the U.S., we doubled the capacity of the business through investment in a new manufacturing plant in Wisconsin, which supported even higher rates of profit growth within the U.S. market. We are pleased to be selling this iconic brand and highly strategic asset to Diamond Foods, whose heritage of delivering the consumer premium snacking products and market-leading innovation complements the core tenets of Kettle Foods."

Diamond Foods is based in San Francisco.