Berkshire Hathaway Inc. agreed to buy the Duracell battery business from Procter & Gamble Co. (PG) in a stock swap as Chairman Warren Buffett narrows his company’s equity portfolio and extends a bet on operating businesses.

Berkshire will turn over $4.7 billion of P&G shares held by Buffett’s Omaha, Nebraska-based company, according to a statement today. Duracell will have about $1.7 billion in cash when the deal is completed, which is expected in the second half of next year, according to the statement.

The exchange may help Berkshire reduce most or all of its stake in Cincinnati-based P&G without incurring the tax costs of selling shares for cash. Berkshire held more than 100 million P&G shares as recently as 2008 and cut the holding several times since then as the consumer-goods company faltered under previous Chief Executive Officer Bob McDonald. Berkshire’s stake is valued at about $4.7 billion, according to data compiled by Bloomberg.

“It’s a brilliant financial deal,” Buffett biographer Andrew Kilpatrick said in a phone interview. “He’s getting a tremendous deal, tax-wise.”

P&G, the world’s largest consumer-products company, announced last month that it would divest Duracell. CEO A.G. Lafley has been streamlining the company, cutting expenses and selling non-core businesses. P&G sold its pet-food business and has said it will jettison as many as 100 of its slower-selling brands.

David Fuller's view

My initial reaction was that this is a good deal for Buffett, not least because of the tax savings but also because as a consumer, I have always preferred a battery made by Duracell. 

Therefore I was surprised that the battery manufacturer was a slow mover for P&G.  If this is mainly a consequence of slow global growth rather than competition, then Buffett should have an even better deal.  However opinions are divided on this point, but both Proctor & Gamble and Berkshire Hathaway remain shares in form, albeit becoming temporarily overextended.