Buffett buys battery business

Warren Buffett's investment vehicle Berkshire Hathaway announced Thursday it would buy battery maker Duracell from Procter & Gamble, in a deal valued at some $3 billion (2.4 billion euros).

The consumer goods company will receive shares of its own stock to the tune of $4.7 billion currently held by Berkshire, one of P&G's top shareholders. In return, P&G will prop up Duracell with about $1.8 billion in cash before the transaction.

For Berkshire CEO Warren Buffett, it is the latest addition to an impressive portfolio of well-known consumer brands. The deal follows the 84-year-old business magnate's pattern of investing in easy-to-understand brands with a strong competitive advantage.

"I have always been impressed by Duracell, as a consumer and as a long-term investor in P&G and Gillette," he said in a statement. Buffett was Gillette's largest shareholder, when P&G bought the company, which also owned Duracell, in 2005.

Out with the old, in with the new

The acquisition adds a twist to P&G's initial spinoff plans announced last month. The company is making efforts to trim its product lineup from nearly 200 to 80 this year to focus on its top sellers such as Pantene and Pampers. It comes at a time, when smartphones and other 21st-century technologies are increasingly rendering traditional, non-rechargeable batteries obsolete.

This shift had some critics question if it is a wise investment for Buffett. "I'd rather have the Procter & Gamble shares," business author and investor Jeff Matthews said. "I think Procter & Gamble will get more valuable over time, and Duracell will get less valuable."

Still, Andy Kilpatrick, author of a book about Buffett, hailed the deal as brilliant, projecting that Berkshire would pay less than half of what Gillette put up for Duracell in 1996.

"It is a brand name and [Buffett's] getting it cheap," Kilpatrick said.

The transaction is expected to be completed in the second half of 2015.

pad/uhe (Reuters, AP)