Procter & Gamble
solidified its commitment to China Tuesday, saying it would buy out a joint-venture partner there for roughly $1.8 billion.
Cincinnati-based P&G will pay $2 billion for the 20% interest in the venture held by
in a transaction that is expected to close June 18. The net cost will be $200 million less because of the extinguishment of various minority interests and obligations, P&G said, adding that the earnings impact will be minimal this year and slightly additive next year.
The venture, P&G Hutchison Ltd., began in mainland China 16 years ago, with Procter & Gamble holding an initial 69% stake. A restructuring in 1997 brought the U.S. company's share to 80%, with a full-buyout provision running from 2007 to 2017.
"Based on the rapid growth of P&G's business in China, the company believes a later buyout would likely have occurred at a significantly higher price," the company said. "The outstanding results of our China business give us confidence that we have the right people, the right business strategies and the in-depth understanding of local consumers and retailers in China to continue to build this fast-growing business."