General Mills on Wednesday announced the sale of its Pop Secret Popcorn business to California-based Diamond Foods Inc. for about $190 million in cash.

General Mills spokeswoman Heidi Geller said that the company sees more growth potential in grain snacks, and will focus on its Nature Valley and Fiber One brands in the coming year.

Pop Secret, which brought in just less than $150 million in sales for fiscal 2008, is the second-largest U.S. microwave popcorn business, after ConAgra's Orville Redenbacher brand. Pop Secret's sales make up about 7 percent of General Mills' snack portfolio, which includes brands such as Nature Valley and Bugles.

Although Geller said General Mills sees "Pop Secret as a strong business," Thrivent senior equity analyst Mariann Montagne said popcorn has seen a sharp increase in production costs over the past year. Corn, fuel and paper prices have all increased recently, she said, and varieties of corn grown to make popcorn have suffered losses in acreage as farmers prioritize their corn for ethanol.

"In my mind, it's not the best outlook for this part of snacks," Montagne said.

In a conference call Wednesday, Diamond Foods President and CEO Michael Mendes said the culinary- and snack-nuts company believes the acquisition will add to its earnings in its first year.

"It will significantly broaden our presence in the snack aisle and increase promotional efficiency," he said.

Diamond Foods expects that Pop Secret will add $85 million to $90 million in sales in 2009. Geller said she believed that figure refers to the sale of the product from manufacturer to retailer -- not the retailer-to-consumer sales reported by General Mills.

Diamond Foods didn't return calls Wednesday seeking comment.

The popcorn production will be handled by Weaver Popcorn Co. at a facility acquired from General Mills in Van Buren, Ind. Diamond Foods also acquired about a year's worth of inventory and corn kernels.

The sale is expected to be finalized in 30 to 45 days, according to Mendes.

After costs, General Mills will receive about $160 million in cash.

Emma L. Carew • 612-673-7405