This is the latest move by Boston-based Gillette to expand beyond its core base of shaving products. The all-share transaction is also a coup for the New York buyout firm, Kohlberg Kravis Roberts (KKR), which purchased Duracell from Kraft in 1988 for $1.8bn. KKR has steadily reduced its investment since the buyout, but still holds a 34 per cent stake.
"This transaction represents an excellent strategic fit for Gillette," said Alfred Zeien, Gillette's chief executive and chairman, yesterday. Mr Zeien has led the effort to diversify Gillette's product line since he took control in 1991.
Gillette continues to derive the bulk of its profits from the shaving sector, with products such as the Sensor razor, Braun shavers and Gillette shaving foams as well as Right Guard deodorant. In his efforts to broaden the spread of the company, Mr Zeien has overseen the acquisition of Parker Pen and the Oral-B dental line.
Consistent with this strategy has been his efforts to ensure Gillette remains number one in the world in the products it sells. Gillette claims to be the world leader in shaving products, writing instruments - Paper Mate is also in the stable - and, through this deal, in domestic battery sales.
Duracell, based in Bethel, Connecticut, leads the battery market ahead of the Ever Ready/Energiser brand owned by Ralston Purina. It hopes to benefit from yesterday's deal because of Gillette's broad presence and marketing clout world-wide.
Charles Perrin, Duracell's chairman and chief executive, said: "With the resources of Gillette supporting us, we anticipate expanding our worldwide leadership in the battery business at a faster rate, due to the benefit of the significant presence of Gillette in markets where Duracell is not as strongly recommended."
Under the share-swap deal, holders of Duracell stock will receive 0.904 shares of Gillette stock for each share they own. Duracell was trading at $55.50 on Wall Street at the time of the announcement yesterday, after rising more than $6 in the morning on rumours of the takeover. Gillette stock slid $1.37 to $63.75.
The Duracell sale is only the latest of a series of disposals by KKR, which is believed by many to be gathering funds for a fresh round of acquisitions. Most recently, KKR sold its remaining stake in reinsurer American Re Corp. New York-based KKR specialises in buying companies, boosting their values and then selling them.
KKR, which made its initial purchase of Duracell for the equivalent of roughly $5 a share, began selling its stake in 1991 when it took the company public with a public offering.
Although Duracell has 50 per cent of the US alkaline battery market, its performance over recent months has rather disappointed Wall Street investors.Reuse content