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CINCINNATI — As part of its strategy to sharpen its focus on core brands, Procter & Gamble Co. plans to spin off the Duracell battery business.
P&G announced the plan Friday in reporting fiscal 2015 first-quarter earnings.
The consumer products giant said that it’s exiting the battery business in two steps. The first step was closing an agreement to sell its interest in a China-based battery joint venture, which was finalized in late-August. Terms of the transaction weren’t disclosed.
The second step is the exit of the Duracell business. P&G said that it prefers to spin off Duracell as a stand-alone company but noted that no decision has yet been made about how it would exit the battery business. In a spinoff, 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 said it would notify its shareholders when a final decision is made about the form of the business separation. The company said any alternative exit scenario — including a spin-off, divestiture or other offer — that generates equal or better value will be considered.
P&G reported that it expects to complete the transaction in the second half of calendar 2015.
"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, chairman, president and chief executive officer of P&G, 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."
P&G said that for the time being it will continue to report results of the Duracell business as continuing operations.
During the first quarter, P&G took a noncash, after-tax charge of $932 million, or 32 cents per share, to adjust the carrying values of goodwill and indefinite-lived intangible assets in its Duracell battery business. The company said it is writing down the asset value of its battery business to be more reflective of the value it will receive from the recently announced sale of its interest in a China-based battery joint-venture.
In August, P&G said it aims to drop as many as 100 brands over the next couple of years to better focus on its most profitable product lines.
At the time, published reports said Lafley told analysts that 90 to 100 brands would be cut via sales or eliminations over the next two years. He noted that the remaining 70 to 80 consumer brands account for about 90% of the company’s sales and roughly 95% of its profit. The company didn’t name brands to be sold or discontinued, but its main profit drivers and the brands on which it aims to focus include Tide laundry detergent, Crest toothpaste, Gillette shaving products, Charmin toilet paper and Bounty paper towels, reports said.
