Berkshire Hathaway Inc. has agreed to buy Procter & Gamble Co.’s Duracell battery unit.
The complex deal allows Berkshire chairman Warren Buffett to acquire a business he has supported for two decades and reduce his company’s tax bill, Reuters reported Friday.
Berkshire will give P&G US$4.7 billion worth of the shares it owns in the world’s largest consumer products firm.
P&G will inject US$1.8 billion in cash into Duracell before the deal is due to close in next year’s second half.
The transaction announced Thursday helps P&G chief executive A.G. Lafley streamline his company by shedding slow-growing brands. P&G is known for its Tide laundry detergent and Pampers diapers.
Buffett avoids a big tax bill that Berkshire might have incurred if it sold its P&G shares. P&G and Berkshire shares hit record highs this week.
Buying Duracell is a “brilliant move”, said Doug Kass, who is a longtime Berkshire critic.
“Warren loves mature and durable consumer brands that produce predictable cash flow. Duracell fits the bill,” Kass said.
Berkshire has said it paid only US$336 million for its 1.9 percent stake in P&G.
“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. Berkshire has owned P&G stock since the consumer goods giant bought Gillette Co. in 2005. Buffett had invested in the shaver manufacturer since 1989.
While Duracell has more than a quarter of the global market for batteries, demand has slackened amid the growth in smartphones and other devices that rely on rechargeable power sources.
– Contact us at [email protected]