The snacks maker Diamond Foods has said that it has “agreed to buy the potato-chip maker Kettle Foods from Lion Capital for $615 million”, in a move to expand its presence in growing potato-chip market.

The announcement of the acquisition came after the close of market trading on Thursday. On Friday, stock in Diamond Foods, which is based in San Francisco, tumbled $3.86, or 10 percent, to $34.85 a share.

A statement released by the company, said, “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 expects the deal to add to earnings in fiscal 2011, and add more than $250 million in revenue.

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

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

Shares of the company closed at $38.71 on Thursday, on Nasdaq.