P&G powers down Duracell
First it was pet care and now Procter & Gamble is exiting the battery business by shedding the Duracell brand as part of a strategy to focus and strengthen its core portfolio.
The announcement was made in conjunction with the release of first quarter results that saw sales increase 2% to $20.8 billion and earnings per share increase 2% to $1.07 or 9% when adjusted for foreign exchange effects.
“P&G’s first quarter results were in-line with our expectations, despite a very difficult operating environment,” said chairman, president, and CEO A.G. Lafley. “This keeps us on-track to deliver our fiscal year commitments. We continue to accelerate and increase productivity savings, sharpen our strategies and strengthen our portfolio by focusing on our biggest opportunities. The pet care divestiture and exit of the battery business will allow us to further focus these efforts.”
P&G will exit the Duracell personal power business by creating a stand-alone Duracell company in a two step process. The first step was finalizing an agreement to sell its interest in a China-based battery joint venture, which it accomplished in late-August. The second step is the exit of the Duracell business. Although no decision has been made on the form of the exit, P&G said its current preference is a split-off of the Duracell business into a stand-alone company.
Under such an arrangement, P&G shareholders would be given the option of exchanging some, none, or all of their P&G shares for shares in the newly formed Duracell company. P&G’s outstanding share count would be reduced by the number of P&G shares exchanged. The exact exchange ratio would be set just prior to the completion of the transaction, which P&G expects would occur in the second half of calendar year 2015.
P&G said it would notify its shareholders when a final decision is made regarding the form of the business separation. The Company added that any alternative exit scenario – including a spin-off, divestiture or other offer – that generates equal or better value will be considered.
“We greatly appreciate the contributions of our Duracell employees. Since we acquired the business in 2005 as part of Gillette, Duracell has strengthened its position as the global market leader in the battery category,” said Lafley said. “It’s a business with attractive operating profit margins and a history of strong cash generation. I’m confident the business and its employees will continue to thrive as its own company.”
The Duracell announcement is the second major divestiture for P&G. During the company’s first quarter it divested its pet business in the Americas to Mars, Inc., and sold its European pet business to Spectrum Brands.