Berkshire Hathaway, the conglomerate operated by billionaire Warren Buffet, is set purchase Duracell from Procter and Gamble in an effort to lower its overall taxes and shed "unfitting" brands.
Before the deal, P.&G. will first recapitalize Duracell by putting in about $1.8 billion in cash into the subsidiary. Then Berkshire Hathaway will take over the battery business by exchanging its shares worth $4.7 billion in P.&G.
Both companies will benefit from the deal as they would avoid significant taxes and will also let P&G to separate with Duracell faster instead of spinning it off in which the maker of Tide detergent and Crest toothpaste would have let its shareholders exchange some of their investments for shares in Duracell.
Swapping stocks is a strategy done by Berkshire Hathaway previously to sell its shares without having to shell out large amount of taxes.
Buffet is also looking forward to add another well-known brand in its massive portfolio, which includes See's candy and Fruit of the Loom underwear.
"I have always been impressed by Duracell, as a consumer and as a long-term investor in P.&G. and Gillette," Mr. Buffett said in a statement.
"Duracell is a leading global brand with top quality products, and it will fit well within Berkshire Hathaway."
Duracell has had several owners before Buffet. For the past 50 years. The brand has been passed through private equity firm Kohlberg Kravis Roberts as well as Gillete, which paid $7 billion for the battery business back in 1996.
P&G got hold of Duracell from Gillette for a whopping $57 billion. Duracell did not disappoint, performing well since coming into P&G's helm.
Meanwhile, P&G intends to sell Duracell in order to shed brands showing lower growth, "especially those that do not necessarily fit well in its core stable of products." With this, P&G has already sold more than 10 businesses in this year alone which includes the Iams pet food brand for $2.9 billion.
