Kraft to Sell Duracell Battery Unit : Management, Kohlberg Kravis Roberts Offer $1.8 Billion

Kraft Inc. said Thursday that it was selling its fast-growing Duracell battery division to a group led by management and the investment firm Kohlberg Kravis Roberts & Co. in a cash deal worth $1.8 billion.

Kraft said it agreed to sell Duracell Inc., the world’s leading maker of alkaline consumer batteries, to concentrate on its core food business.

Proceeds from the sale would be used to buy back up to 12 million Kraft shares, to reduce debt and for possible food-related acquisition, the company said.

“We are excited about the many opportunities available to Kraft in the food industry, and the sale of Duracell will enable us to focus our total management and financial resources on those opportunities,” said Kraft Chairman John M. Richman.

Price Surprises Some

Kraft informed its shareholders of the definitive agreement at its annual meeting Thursday in Chicago. Kraft, which acquired Bethel, Conn.-based Duracell in 1980, had announced in December that it planned to sell the unit.

Henry R. Kravis, a partner in New York-based Kohlberg Kravis, called the agreement “the first step in the creation of a great new independent consumer-products company.”

“We are very excited about the future growth prospects of the company and our future association with the management and employees of Duracell,” he said.

Some analysts expressed surprise at the price Kohlberg Kravis agreed to pay for Duracell, which had been widely expected to fetch between $1 billion and $1.2 billion.

“It never ceases to amaze me what a good brand is worth in today’s marketplace,” said John W. McMillin of Prudential-Bache Securities Inc. “This was pleasant news for Kraft shareholders.”

In composite trading on the New York Stock Exchange, Kraft rose $1.50 a share to close at $53.50.

McMillin said Kohlberg Kravis probably was attracted by Duracell’s strong growth potential.

28% of Market

Duracell, which has about 9,000 employees, had an operating income of $140 million and sales of $1.1 billion last year. Kraft’s 1987 sales, excluding Duracell, were $9.9 billion.

Duracell’s copper-top alkaline batteries account for about 28% of all U.S. consumer battery sales.

The company is tied with Ralston Purina Co.’s Eveready unit for the lead in domestic sales of alkaline batteries, the fastest-growing segment of the battery market.

Together, Eveready and Duracell have more than 80% of the domestic alkaline-battery market, McMillin said. Duracell does not compete in the carbon-zinc battery market, which is dominated by Eveready.