Diamond Foods on prowl for deals: CEO

CHICAGO (Reuters) - Diamond Foods Inc (DMND.O: Quote, Profile, Research) is likely to look for acquisitions in the current market, especially as competition from private equity firms has become much less prevalent, the nut seller's chief executive said on Monday.

"We are going to have more of a bent to be inquisitive (about acquisitions) in the future, especially in the current environment," CEO Michael Mendes said at the Reuters Food Summit in Chicago.

"Now that private equity is more on the sideline than they were, say 18-24 months ago, I think it could be an environment that an acquisition that could make us better as a company was available, that is something we'd pursue," said Mendes.

The company makes and sells cooking nuts under the Diamond name and snack nuts under the Emerald brand.

The top acquisition priority is in the snack business, a segment the company is trying to grow scale in, Mendes said.

The company expects to have earnings before interest, taxes, depreciation and amortization of $36 million to $38 million this year. That could help fund an acquisition even in a tight credit market when money for deals is harder to come by, he said.

Yet Diamond, with expected revenue of a little over $500 million for fiscal year 2008, is also of a size that could be attractive to a larger company as a fill-in acquisition.

But Mendes said the company's projected growth means it makes sense to stay independent, at least at what the market currently values it at.

The company plans to grow its gross margin to 20 percent in 2011 from a target of 15 percent this year and operating margin to 10 percent from the 2008 target of 4 percent. That would in turn mean earnings growth, Mendes said.