Warren Buffett to Buy Duracell in $4.7 Billion Stock Deal
By Michael J. de la Merced

As a deal maker, Warren E. Buffett has shown a number of preferences. One is for well-known brand names and another, for finding a way to buy them without incurring a huge tax bill.

His agreement to buy the battery maker Duracell from Procter & Gamble hits both those requirements.

By essentially agreeing to swap his firm’s holdings in P. & G., worth about $4.7 billion, in exchange for Duracell, Mr. Buffett will gain one of the best-known battery companies in the world, even if its prominence has diminished as its growth has slowed.

And P. & G. will avoid an alternative plan, disclosed last month, that would basically sell a nonessential business to its shareholders in exchange for some of their shares. The consumer products conglomerate has been shedding smaller businesses to concentrate on its biggest moneymakers, including Crest toothpaste, Tide detergent and Gillette razors.

But among the most notable features of the complex transaction is that it will help both Mr. Buffett’s company, Berkshire Hathaway, and P. & G. legally minimize their tax bill. (Berkshire paid roughly $336 million for its stake in P. & G. With the stake now worth many times that, Berkshire might have owed more than $1 billion in taxes.)

The maneuver announced on Thursday — known as a “cash-rich split-off” — falls within guidelines set by the Internal Revenue Service that allow for corporate businesses to be sold using stock without taking a big tax hit. P. & G. has been especially eager to find a way to part with the division in a low-tax manner, since it took on Duracell as part of its $57 billion takeover of Gillette nine years ago.

According to Robert Willens, an independent corporate tax adviser, an I.R.S. ruling that the transaction was tax-free should be “eminently achievable.”

Still, the move highlights the contrast between Mr. Buffett’s repeated calls for higher personal taxes on wealthy individuals like himself and his efforts to minimize the tax bill for Berkshire. So strong was his advocacy on the personal income tax front that the White House named a proposed rate increase the Buffett Rule.

Yet the billionaire used split-offs several times earlier this year, allowing him to acquire a maker of lubricants for oil pipelines, among other assets. He also traded his shares in Graham Holdings, owner of the Kaplan education company and the former parent of The Washington Post, in exchange for a Miami television station, some cash and shares in Berkshire Hathaway that Graham Holdings owned.

And he is backing the effort by Burger King Worldwide to relocate its corporate home abroad through its acquisition of the Canadian coffee chain Tim Hortons. The so-called inversion has been used by several American companies to reduce their taxes.

Mr. Buffett has framed the two positions as consistent, in that he complies with existing laws. “I will not pay a dime more of individual taxes than I owe, and I won’t pay a dime more of corporate taxes than we owe,” he told Fortune magazine this year.

He has also defended Burger King’s inversion, telling CNBC that the transaction was not meant to reduce the fast-food chain’s tax bill.

Aside from saving on taxes in the Duracell deal, Berkshire will add yet another prominent name to its stable of brands, a collection as diverse as Fruit of the Loom underwear and Dairy Queen. In recent years, Mr. Buffett has moved more to buying companies outright rather than holding major stakes.

The battery maker fits squarely into the kind of business that Mr. Buffett likes to buy, producing relatively steady cash flows and having a strong market position. The business commanded about 25 percent of the global battery market last year, according to P. & G.’s most recent annual report.

“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.”

Mr. Buffett will become the latest owner of Duracell, which has passed through several companies in its 50 years as a brand. Others that have controlled Duracell include the private equity firm Kohlberg Kravis Roberts and Gillette, which paid $7 billion for the business in 1996.

The transaction is part of an effort by P. & G. to slim down by shedding lower-growth brands, especially those that do not fit well in its core stable of products. It has sold at least 10 businesses this year, according to Standard & Poor’s Capital IQ, including the Iams pet food brand for $2.9 billion.

Thursday’s transaction is the biggest-ever divestiture by the company, surpassing its $3.7 billion sale of Folgers coffee to J.M. Smucker in 2008, according to Capital IQ.

P.& G. acquired Duracell when it bought the battery maker’s then-parent, Gillette, in a blockbuster $57 billion takeover. Duracell, maker of the familiar copper-top batteries, has performed well since then. While it had a strong piece of the global battery market, it was seen by analysts as having little in common with P. & G.’s other brands.

Mr. Buffett became a big shareholder in P. & G. through the Gillette takeover, since Berkshire Hathaway owned a 9 percent stake in the razor maker. He has pared that stake over time, but as of this summer remained the fifth-biggest shareholder in P. & G.

金頂「跳電」 巴菲特出手收購

股神巴菲特掌管的波克夏公司已同意以近50億美元股票，向寶鹼（P&G）收購金頂（Duracell）電池事業。

根據協議，波克夏將以47億美元的寶鹼股票交換金頂，預計明年下半年完成交易，寶鹼則將出資18億美元現金調整金頂的資本。這樁交易將使寶鹼本季提列每股28美分的費用。

巴菲特說：「身為消費者及寶鹼和吉列（Gillette）的長期投資人，我一直對金頂印象深刻。金頂是全球領導品牌，產品品質高，很適合納入波克夏。」

這樁交易可能有助波克夏在不多繳稅的情況下減少持有的寶鹼股票。根據FactSet的數據，波克夏是寶鹼第五大股東，持有5,280萬股或近2%的寶鹼股票。寶鹼正在推動縮減旗下品牌以簡化營運及提高營收成長率的計畫，10月宣布將脫手金頂。金頂雖然是電池市場龍頭，成長卻欲振乏力。

原文參照：
http://dealbook.nytimes.com/2014/11/13/warren-buffetts-berkshire-to-buy-duracell-battery-from-procter-gamble/

2014-11-14．經濟日報．A7．國際．編譯林文彬