OMAHA, Neb. (AP) — Warren Buffett’s Berkshire Hathaway is buying the Duracell battery business from
Procter & Gamble Co. in a deal valued at approximately $3 billion.
Duracell a stand-alone company. P&G, which acquired Duracell in 2005, said at the time that it
preferred a spinoff of Duracell, but that it was considering a sale or other options.
The sale of Duracell to Omaha, Nebraska-based Berkshire Hathaway Inc. turned out to be slightly different
from P&G’s initial plans.
P&G will receive shares of its own stock that are currently held by Berkshire Hathaway. Those
shares are currently valued at about $4.7 billion. Offsetting part of that price, P&G will
contribute about $1.7 billion to the Duracell business before the deal closes.
"I have always been impressed by Duracell, as a consumer and as a long-term investor in P&G
and Gillette," Buffett said in a statement on Thursday.
P&G, whose products include Tide detergent and Pampers diapers, has been trimming its product
lineup to focus on its top performers. After it finishes jettisoning more than half its brands around
the globe over the next year or two, P&G has said that it will be left with about 70 to 80
brands.
Berkshire has been a significant P&G shareholder since the consumer products firm acquired
Gillette in 2005, but the Duracell acquisition will use nearly all of Berkshire’s 52.48 million shares.
Buffett has estimated that Berkshire’s P&G stake cost it roughly $336 million.
Buffett is always looking for acquisitions to help his conglomerate grow, but this stock deal won’t use
up any of the $62.4 billion cash Berkshire held at the end of the third quarter. He favors
easy-to-understand businesses that have a strong competitive advantage.
Berkshire already owns a number of well-known consumer brands in its portfolio of more than 80
businesses, including Fruit of the Loom, Geico insurance, Helzberg Diamonds and half of the H.J. Heinz
Co.
Author and investor Jeff Matthews, who wrote "Warren Buffett’s Successor: Who It Is and Why It
Matters," said the deal is a tax-efficient way for Berkshire to sell its P&G stock and
avoid capital gains taxes, but he’s not a big fan of Duracell because of the overall shift to
rechargeable batteries.
"I’d rather have the Procter & Gamble shares," Matthews said. "I think Procter
& Gamble will get more valuable over time, and Duracell will get less valuable."
But Andy Kilpatrick, author of "Of Permanent Value: The Story of Warren Buffett," said it
appears like a brilliant deal because Berkshire is getting Duracell for less than half what Gillette
paid for it in 1996 and saving on taxes.
"It is a brand name and he’s getting it cheap," Kilpatrick said. "And it’s a good way to
get out of P&G stock."
Cincinnati-based P&G said it will take a charge of about 28 cents per share in its current
quarter related to the Duracell deal. The transaction is expected to close in the second half of 2015.
Shares of P&G rose 30 cents to $89.78 in morning trading Thursday. Berkshire Hathaway Class B
shares rose 65 cents to $146.18.
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Michelle Chapman reported from New York.
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