In announcing a plan to split off Duracell, Procter & Gamble will give the battery maker something it hasn’t had in nearly two decades: life as an independent company.
The announcement by P.&G. is part of an effort by the consumer products conglomerate to slim down by shedding lower-growth businesses. But Duracell is perhaps the most-recognizable business that the company plans to divest thus far.
Born from the creation of the AAA battery, Duracell was formed as a brand in 1964 by the P. R. Mallory Company, gaining its now-familiar copper-top design in the early 1970s. P. R. Mallory was acquired by Dart Industries in 1978, taking on the name of its famous product.
Two years later, Dart then merged with Kraft, though the two companies split in 1986, with Kraft holding on to Duracell. In 1988, the battery maker gained yet another new owner: Kohlberg Kravis Roberts, which paid about $1.8 billion for the business as part of the leveraged buyout boom at the time. (At the time, Kraft said that it was divesting the company to focus on its core food products.)
Seeking to reduce the debt owed by the battery producer, K.K.R. took the company public in 1991. Duracell lived as an independent company until 1996, when it was acquired by Gillette in a $7 billion deal that united two big consumer brand companies. By that point, K.K.R. had reaped about $3 billion in profit on its equity investment in the business.
The company then found itself with a new owner one last time, when P.&G. bought Gillette in a blockbuster $57 billion transaction.
Duracell has performed relatively well under P.&G., holding about 25 percent of the battery market last year. But analysts have said that it has little in common with its parent’s core household offerings.
“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,” A. G. Lafley, P.&G’s chief executive, said in a statement. “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.”
Though P.&G. hasn’t formally decided on how to carve out Duracell, the company said that it favored splitting off the business sometime in the second half of next year. In that possibility, P.&G. shareholders would have the option of exchanging some of their existing holdings in the conglomerate for stock in the newly independent battery maker.
The maneuver would not only lead to a divestiture of Duracell, but also reduce its former parent’s shares outstanding.
Of course, P.&G. could also decide to pursue another option, including an outright sale or more-straightforward spinoff, in which the company would simply distribute shares in Duracell directly to shareholders.