China's CDH agrees Nanfu Battery carve-out from P&G

The private equity firm will take a 79% stake in Nanfu Battery, with the entire transaction worth in the region of $1 billion, according to a source familiar with the situation. It is expected to be completed before December.

A P&G spokesperson told the Cincinnati Business Courier that the divestment would allow the company - which is headquartered in Cincinnati - to focus on its core Duracell battery brand globally as well as within China. "This reflects and underlines our commitment to driving growth within our core businesses," the spokesman added.

P&G announced plans in August to offload more than half of its brands as part of efforts to become faster-growing and more profitable. The company reported net earnings of $11.6 billion for the 2014 financial year, up from $11.3 billion in 2013. Net sales were largely flat at $83 billion. P&G will focus on the 70-80 core brands that account for 90% of sales and more than 95% of profit.

The company has already sold its pet food business in the US to Mars and also intends to divest the Asian operation.

Nanfu Battery was acquired as a result of P&G purchase of Gillette - which also owned Duracell - in 2005. Gillette bought a majority stake in Nanfu Battery in 2003. At the time, the company had revenues of $84 million and net profit of just under $12 million, and distributed its products through more than three million retail outlets nationwide. The Nanfu share of China's battery market was around 30%, compared to less than 10% for Gillette.

According to AVCJ Research, China International Capital Corporation (CICC) invested $60 million in Nanfu Battery in 1999 to help the company improve its product line and fight off competition from the likes of Duracell. CDH - which spun out from CICC in 2002 - committed an undisclosed sum to Nanfu Battery in 2002.

In addition to being the number one battery maker in China, Nanfu Battery now claims to be the third-largest manufacturer in Asia and the fifth-largest globally. It has an annual production capacity of more than 1.2 billion alkaline batteries. The company's Excell-branded products have been registered in more than 50 countries. Other brands include Nanfu and Ecoenergy. It is headquartered in Nanping, Fujian province.

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