New York: Warren Buffett’s Berkshire Hathaway Inc said yesterday it would buy Procter & Gamble Co’s Duracell battery unit in a stock swap, taking over a business the billionaire has supported for nearly two decades.
The transaction calls for P&G to receive about $4.7bn of its own shares that Berkshire now owns. P&G would infuse $1.8bn in cash into Duracell before the expected closing in the second half of 2015.
Chief Executive Officer AG Lafley is streamlining the Cincinnati-based P&G by shedding slow-growing brands and focusing on about 80 businesses that generate most of its profit and revenue. Tide laundry detergent and Pampers diapers are among its better-known products.
The addition of Duracell, whose batteries are known for their copper-coloured tops, gives Buffett a familiar name to add to Berkshire’s stable of more than 80 businesses, including Benjamin Moore paint, the Dairy Queen fast-food chain and Heinz ketchup. Also, Buffett would avoid a big tax bill that his Omaha, Nebraska-based company might incur if it sold its P&G shares on the open market.
Berkshire has said it paid just $336 million for its 1.9 percent stake in P&G, which totaled about 52.8 million shares as of June 30. P&G stock dipped 0.2 percent to $89.32.
The Duracell purchase is a “brilliant move” for Buffett, said Doug Kass, who runs Seabreeze Partners Management in Palm Beach, Florida. “Warren loves mature and durable consumer brands that produce predictable cash flow. Duracell fits the bill.”
Berkshire has owned P&G stock since P&G bought Gillette Co in 2005. Buffett had invested in Gillette since 1989.
Buffett was about halfway through a 14-year stint on Gillette’s board when that company agreed to buy Duracell for $7bn in stock in 1996. That’s more than twice what Berkshire is paying, after accounting for the cash infusion. Reuters
