Gillette to buy Duracell in swap Deal for battery maker involves stock, debt worth $7.83 billion

September 13, 1996|By BLOOMBERG BUSINESS NEWS

BOSTON -- Gillette Co. said it will buy battery maker Duracell International Inc. for about $7.83 billion in stock and debt, its boldest move yet to dominate the world's supermarket shelves and checkout lines.

The purchase, equal to $59.66 a share, is part of Chairman Alfred Zeien's five-year drive to turn Gillette from a razor maker into a global powerhouse with products such as Right Guard deodorants, Braun shavers and Parker pens.

Boston-based Gillette expects to use its deep pockets and marketing muscle to stock stores worldwide with Duracell's copper-topped batteries. That'll be a big boost: About 70 percent of Gillette's sales are overseas, compared with less than half of Duracell's.

"At the checkout counter, there'll be nobody who can even touch what we can do," said Zeien.

The purchase will also be a huge payoff for Kohlberg Kravis Roberts & Co., which has made a $3 billion profit on its $350 million cash investment in the biggest maker of alkaline batteries. The New York leveraged buyout firm holds a 34 percent stake in Duracell.

Shares in Bethel, Conn.-based Duracell closed up $9 to $58.125, up from $39.75 about two months ago and surpassing its previous high of $55 set in November.

About 10.2 million shares traded, making it the most actively traded U.S. issue yesterday. Gillette shares closed up 87.5 cents to $66.

Gillette will swap 0.904 of a share for each one held by Duracell investors. Gillette will issue about 108 million shares and take a charge of about $275 million, or $240 million after taxes, Zeien said.

"It's a great acquisition for Gillette," said Scott Swanson, an analyst at Roger Engemann & Associates, which owns 4 million Gillette shares and 1.8 million Duracell shares.

Gillette can quickly rev up Duracell's growth, he said, something that would have taken Duracell two to three years.

The transaction is expected to close in mid-December.

A takeover of Duracell would be the largest acquisition ever by Gillette, which has grown from a maker of razors and blades to a diversified household products company.

Razors, such as its popular Sensor, and blades accounted for 39 percent of its $6.8 billion in sales last year, and Braun contributed 24 percent, the company said.

Earnings at Gillette, which also makes Paper Mate pens, Braun electric shavers and Oral-B dental care products, have increased at a double-digit rate in each quarter for more than five years.

Gillette said it sees cost savings of $80 million to $120 million over two years after the acquisition is completed. It said it expects analysts to raise their earnings estimates for the company.

Duracell, with annual sales of $2.3 billion, has about half of the U.S. alkaline battery market, above Eveready/Energizer, which is owned by St. Louis-based Ralston-Purina Group.

Pub Date: 9/13/96

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