US-based Berkshire Hathaway Inc, the firm run by billionaire value investor Warren Buffett, has agreed to acquire consumer products company Procter & Gamble Co's (P&G) Duracell battery business in an innovative tax efficient split transaction.
As per the definitive agreement, P&G will infuse approximately $1.7 billion in cash into Duracell Company at the time of closing of the transaction, and will receive its own common stock currently held by Berkshire Hathaway having a current value of over $4.7 billion. This would value the deal at approximately $3 billion.
The deal, which is expected to be completed by the second half of 2015, is subject to various regulatory approvals as well as certain other customary closing conditions.
“I have always been impressed by Duracell, as a consumer and as a long-term investor in P&G and Gillette,” Warren Buffett, Berkshire Hathaway chief executive officer, said. “Duracell is a leading global brand with top quality products, and it will fit well within Berkshire Hathaway,” he added.
Household products maker P&G, whose brands include Pampers diapers and Tide detergent, had announced last month plans to exit its battery business, possibly by splitting off its brand Duracell into a stand-alone company, as part of its efforts focus on brands that are growing fast.
“We thank the Duracell employees for their many contributions to the business. They’ve made Duracell the global market leader in the battery category...I’m confident this new ownership structure will provide strong support for Duracell’s future growth plans,” AG Lafley, P&G chief executive officer, said.
In India, P&G operates a public listed arm and also sells Duracell. However, Duracell is not part of the listed subsidiary in the country.
On the other side, Omaha, Nebraska-based Berkshire, which operates in India through Berkshire India, has interests in property and casualty insurance and reinsurance, utilities and energy, freight rail transportation and finance.
Goldman Sachs & Co. acted as financial advisor; Cadwalader, Wickersham & Taft LLP acted as tax counsel, and Jones Day acted as legal counsel to P&G.
(Edited by Joby Puthuparampil Johnson)