Warren Buffett to buy Duracell from P&G in a stock swap deal worth $3 bn
14 November 2014
Warren Buffett's Berkshire Hathaway Inc yesterday struck a deal to buy Procter & Gamble Co's (P&G) Duracell battery unit in a stock swap deal worth $3 billion.
Under the deal, P&G will receive about $4.7 billion of its own shares that Berkshire currently holds and P&G will invest $1.8 billion in cash in Duracell before the transaction closes, which is expected in the second half of 2015.
Omaha- (Nebraska) based Berkshire had since the past two decades acquired 52.8 million shares or a 1.9-per cent stake in P&G at an average price of just $336 million.
The deal has come as no surprise, as last month P&G had said that it would exit its 50-year-old battery brand, Duracell, and create a stand-alone company for it. (See: Procter & Gamble to spin off 50-year-old Duracell battery brand)
Ohio-based P&G said that it has made no decision on the form of the exit, but its current preference is a split-off of the Duracell business into a stand-alone company.
It also added that any alternative exit scenario – including a spin-off, divestiture or other offer – that generates equal or better value would be considered.
''I have always been impressed by Duracell, as a consumer and as a long-term investor in P&G and Gillette,'' said, Buffett, ''Duracell is a leading global brand with top quality products, and it will fit well within Berkshire Hathaway.''
P&G, the world's largest consumer products maker, has owned Duracell since it acquired Gillette in 2005. Duracell generates sales of $2 billion a year, according to Jon Moeller, the company's chief financial officer.
Duracell was made by scientist Samuel Ruben who teamed up with businessman Philip Rogers Mallory and formed The P R Mallory Company to produce mercury batteries for military equipment.
P R Mallory was acquired by Dart Industries in 1978, which in turn merged with Kraft in 1980.
Private equity firm Kohlberg Kravis Roberts bought Duracell in 1988 and took the company public in 1989. It was acquired by Gillette in 1996 for $7 billion and P&G acquired Gillette in 2005 for $57 billion.
After years of expansion into lines like pet food and beauty products, P&G, which also makes Gillette razors, had said in August that it would cut as many as 100 brands from its portfolio to focus on others, like Tide detergent, which has made the company a powerhouse over the decades.
The move is part of the company's strategy to improve its financial performance by focusing on about 80 brands that generate 95 per cent of the profits and 90 per cent of sales.