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In its first quarter 2015 earnings call, Proctor & Gamble Co (NYSE: PG) announced it will be divesting itself of iconic battery brand, Duracell.
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P&G And Duracell To Amicably Split?
In 2014, Duracell sales accounted for $2.2 of P&G’s $83 billion in sales. As the largest personal battery provider, Duracell also accounts for 25 percent of worldwide battery sales. The business is solid, and P&G isn’t disappointed with the performance, but it doesn’t align with the company’s strategic plans for the future.
CEO A.G. Lafley is putting in place a streamlined plan that will cut P&G’s ancillary, less popular businesses in an effort to focus more on its core categories such as baby care and fabric care. As part of its strategic plans for the future, P&G also intends to narrow down its portfolio of brands to compete in areas that, according its annual report are “structurally attractive and play to the P&G strengths."
“This will enable us to allocate resources to leading brands – marketed in the right set of countries, channels and customers.”
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According to the late October corporate announcement, the Duracell exit strategy is a two-step process. Step one was completed in late August when P&G finalized an agreement to sell its interest in a China-based joint battery venture. The second step of the process is to exit the Duracell business.
P&G has yet to decide how they would like to exit the business, but the preferred method is to split Duracell into a stand-alone company.
Is A Spin-Off In Sight?
Shareholders of P&G could benefit by being able to exchange a portion of their P&G shares for shares in the new company. Typically, spin-offs are very favorable events to investors because they provide an increased valuation for the divested company as opposed to a private sale to another business entity.
This can be for a variety of reasons, including a public appetite for the new company – especially one as strong as Duracell. General investors may drive the valuation of the company higher than would otherwise be accomplished in a private sale.
As Proctor & Gamble analyzes its options for a strategic exit, it’s in the interest of investors that the company opens up Duracell for an IPO. Just because it doesn’t fit inside P&G’s future model for growth, doesn’t mean it should be ignored as a viable long-term investment for the general investor.
Disclosure: The author holds no positions in the mentioned securities.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.