Three firms advise on Buffett's Duracell deal

Munger Tolles & Olson LLP represented longtime client Berkshire Hathaway Inc. in its deal to acquire the Duracell battery business from Procter & Gamble Co. Jones Day represented P&G in the stock swap as Chairman Warren Buffett narrows his company's equity portfolio and extends a bet on operating businesses. Cadwalader, Wickersham & Taft LLP advised P&G on the tax aspects of the deal.

Berkshire will turn over $4.7 billion of P&G shares held by Buffett's Omaha, Nebraska-based company, according to a statement yesterday. 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.

Led by Mary Ann Todd, the Munger Tolles corporate team advising Berkshire Hathaway also included partners Robert Denham and Katherine Ku, along with tax partners Stephen Rose and David B. Goldman.

The Jones Day partners representing Procter & Gamble were Bob Profusek and Peter Izanec, both mergers and acquisitions; Tricia Eschbach-Hall, benefits; Tom Briggs, intellectual property; and David Wales, antitrust.

The Cadwalader team was led by tax group chair Linda Swartz, who has served as tax counsel to P&G since 2005 on transactions including the sale of its Pringles business to Kellogg Co. and the tax-free acquisition of Gillette Co.

This is the third time in a year that Berkshire has structured a deal in which it buys businesses in exchange for stock that has appreciated. The transactions, called cash rich split-offs, avoid capital gains taxes that would otherwise be incurred if the shares were sold in the open market.

In February, Berkshire handed over a holding in Phillips 66 in exchange for its pipeline-flow-improver business. Buffett later swapped a stake in Graham Holdings Co. for cash, a Miami television station and Berkshire stock that Graham held.

Berkshire highlighted the attractive nature of the deals in its latest quarterly report to the U.S. Securities and Exchange Commission.

"Each exchange transaction was structured as a tax-free reorganization under the Internal Revenue Code," the company said in the Nov. 7 filing. "As a result, no income taxes were provided on the excess of the fair value of the businesses received over the tax-basis cost of the common stock of Phillips 66 and Graham Holdings Company exchanged."

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