Procter & Gamble Co

will sell its Pringles potato chips business to Diamond Foods Inc for $1.5 billion in stock, creating a new snack foods giant and freeing the consumer products company to focus on cosmetics and healthcare products.

P&G will split off the Pringles business and combine it with Diamond Foods, with P&G shareholders owning 57 percent of the new company and Diamond stockholders the rest, the companies said.

Diamond, known for its Pop Secret popcorns and Kettle chips,

will also assume $850 million of Pringles debt.

By adding Pringles to its portfolio, Diamond will more than triple the size of its snack business, and expects net sales of about $1.8 billion in the fiscal year ending July 31, 2012, the companies said in a statement.

Diamond, which has grown through acquisitions, bought General Mills' Pop Secret business for $190 million in September 2008 and some assets of Harmony Foods Corp in May 2006. It bought potato chips maker Kettle Foods for $615 million in February 2010.

Diamond expects one-time costs of about $100 million related to the transaction over the next two years. P&G said the deal will add about 50 cents a share to its earnings.

Diamond Food shares were up 8 percent at $61.60, while Procter & Gamble shares were down slightly at $62.15 Tuesday before the markets opened.

(Reporting by Nivedita Bhattacharjee in Bangalore; Editing by Jarshad Kakkrakandy and Saumyadeb Chakrabarty)