Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A) is acquiring the Duracell battery brand from Procter & Gamble Co (NYSE:PG) by letting go of his shares at the world’s largest household products company. The transaction regarding the deal, which is expected to complete by the second half of next year, will give P&G Buffett’s $4.7 billion worth of shares. On the other hand, P&G will recapitalize Duracell at the amount of $1.8 billion before finally closing the transaction.
The transaction will allow Procter & Gamble Co (NYSE:PG), whose stocks have declined lately, to focus on brands that accounts for majority of its profit and revenue while divesting itself of non-core slow and slow growing brands.
In a report by ABC NEWS, Morningstar analyst Greggory Warren said that Berkshire Hathaway Inc. (NYSE:BRK.A)’s acquisition of Duracell is one among Buffett’s classic tax efficient transactions, noting further that the deal is a literal swapping of a stock for an asset, which is a non-taxable event. The deal is also the third this year wherein Buffet has traded stocks for cash generating businesses that can give Berkshire Hathaway Inc. (NYSE:BRK.A) earnings while avoiding large amounts of taxes. Buffett has previously traded his Phillips 66 (NYSE:PSX) stocks in exchange for a pipeline chemicals producing unit, and Graham Holdings Co (NYSE:GHC) stocks in exchange for a TV station in Miami and cash assets.
Duracell will be among Berkshire Hathaway Inc. (NYSE:BRK.A)’s expanding array of businesses that include apparel, construction, manufacturers, railroad, retailers, and utilities. Observers note that the rise of smartphones and other devices that rely on rechargeable power sources have slackened the demand for batteries. Sanford C. Bernstein analyst Ali Dibadj, however, estimates that Duracell has generated earnings in the amount of $414 million for the fiscal year ending in June, prior to interests and other related costs and expenses.
This article has been witten Nonito Guntan.