Warren Buffett has long been known as a man with extraordinary foresight when it comes to the stock market and making profitable investments. Those in Maryland who follow Buffett's dealings may already know that he recently decided to make a large investment by purchasing Duracell -- a leading battery manufacturer and distributor. Following an increasing trend, Buffett's company, Berkshire Hathaway, is acquiring the company through a deal that involves a purchase price comprised primarily of stock in Procter & Gamble, which is the company from which Buffett is buying the battery company.
Berkshire Hathaway holds common stock in P&G worth about $4.7 billion, which will be swapped for Duracell along with a cash payment of approximately $1.7 billion. This allows Berkshire Hathaway to avoid paying the taxes that would be assessed on a cash sale of the shares. Buffett agreed to acquire Duracell due to his belief that the business is a consistent earner with good returns and an honest and competent management team.
As for P&G, the deal allows the company to off-load a company that is not considered a core business for the brand. This falls in line with other divestitures the company has made, such as selling off brands like Jif Peanut Butter, Sunny Delight and Crisco. A source in the financial world agrees that Duracell is not a good fit for the company since it does not fit with the other brands the company owns.
However, the battery maker seems to be a good fit for Buffett and his company. When searching for a large investment, Maryland investors might consider following Buffett's lead in acquiring and operating a business rather than just investing in one. Of course, this deal will require approval by federal regulators. In order for that to occur, all of the legal requirements must be met. It is a foregone conclusion that attorneys for both sides will be hard at work making sure the deal happens.
Source: USA Today, "Buffett snaps up Duracell from P&G", Adam Shell, Nov. 13, 2014