Procter & Gamble Buys Out China Venture for $1.8 Bln
May 11 (Bloomberg) -- Procter & Gamble Co., the biggest U.S. household-products maker, bought partner Hutchison Whampoa Ltd.'s remaining 20 percent stake in its China venture for $1.8 billion to expand in one of the world's fastest-growing markets.
The transaction, expected to be completed on June 18, will boost next year's profit, Cincinnati-based Procter & Gamble said in a statement. Tycoon Li Ka-shing controls Hutchison, which is Hong Kong's largest diversified company.
Procter & Gamble Chief Executive A.G. Lafley is investing in China, the company's sixth-largest market, because demand in developing countries for items such as Crest toothpaste is rising faster than in developed economies. The venture, P&G-Hutchison Ltd., was formed in 1988 when Procter & Gamble entered China.
It enhances Procter & Gamble's position in China, which is a key international market that holds attractive potential,'' said Yumi Koh, a Jersey City, New Jersey-based analyst at AIG SunAmerica, which manages $8 billion in assets including Procter & Gamble shares. Obviously, having full ownership gives them more control.''
Procter & Gamble increased its stake in the China venture to 80 percent from 69 percent in 1997, and had the right to acquire the remaining stake by 2017. The latest transaction will have a minimal effect on earnings this quarter, the company said.
Shares of Procter & Gamble rose 41 cents to $106.08 at 4:01 p.m. in New York Stock Exchange composite trading. Shares of Hutchison Whampoa fell HK$1.15 to HK$49.60 yesterday in Hong Kong.
Hutchison said it will record a one-time gain of HK$13.7 billion ($1.8 billion) from the sale. Hutchison, Asia's largest investor in European mobile-phone networks, has been selling assets this year to help reduce losses from investments in high- speed wireless networks.
