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Berkshire Hathaway Inc. (BRK.A) Payed $600 Million Less to Procter & Gamble Co (PG) For Duracell Than Gillette Did to KKR In 1996

Berkshire Hathaway Inc. (NYSE:BRK.A)‘s Warren Buffet is renowned in the financial circles for the extremely profitable deals that he is able to crack, but his latest transaction with Procter & Gamble Co (NYSE:PG), concerning the purchase of Duracell might only take a toddler, who can add two numbers to know that Buffet did good. On CNBC, the Squawk Box team discussed this news.

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Rebecca Quick read out a statement by the man at the helm of Berkshire Hathaway Inc. (NYSE:BRK.A), pertaining to the latest transaction.

” […] There is a comment from Warren Buffet in this Press Release. It says, I have always been impressed by Duracell as a consumer and as a long term investor and Procter & Gamble Co (NYSE:PG) and Gilette […],” said Quick.

The more interesting part of the story was related by Andrew Ross Sorkin. Duracell which has quite a history of changing hands was bought by Gillette in 1996, for $7 billion from KKR, a multinational private equity firm, when Gillette was not a part of Procter & Gamble Co (NYSE:PG).

Gillette’s stock price rose in light of the new development back then, and in 2005 the razor blade manufacturer along with its Duracell subsidiary was sold to Procter & Gamble Co (NYSE:PG) in a $54 billion stock deal.

“[…] Duracell was owned by KKR at the time, when they sold it to Gillette, and of course the argument was that you could sell batteries at the front of every store right next to razors. It was a distribution play at the time. So, it will be interesting to see what Duracell looks like as an independent company and whether there is going to be distribution agreements that will continue […],” said Sorkin

In essence, Berkshire Hathaway Inc. (NYSE:BRK.A) got a nice big fat discount of $600 million on Duracell, and that is without considering the time value of money. $7 billion back in 1996 is worth a lot more today. It brings the question how badly was Duracell hurting Procter & Gamble Co (NYSE:PG) and how does Buffet plan to turn the business around.

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