This article is provided to FT.com readers by mergermarket—a news service focused on providing actionable, origination intelligence to M&A professionals. www.mergermarket.com
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Procter & Gamble has hired Morgan Stanley in an effort to spin off Folgers, the number one instant coffee brand in North America, two industry bankers told mergermarket.
This news service reported in September that P&G had hired the Blackstone Group to auction Folgers, Pringles potato chip and Duracell.
Blackstone remains a P&G advisor on a broader strategic review, which includes Pringles, Folgers and Duracell, the two industry bankers said. Morgan Stanley was hired as an additional banker to work on the spin-off of Folgers, they said.
The company decided to spin off Folgers to its shareholders - rather than sell it - because of the big tax bill on the divestiture of such a large business, according to the two bankers. A third industry banker said they had heard the same information, but did not claim to have first-hand knowledge of Morgan Stanley having been hired.
Folgers is a USD 2bn-plus business, a fourth industry banker said.
P&G conducted a bake-off to find a bank to do the spin-off last year after it hired Blackstone because it wanted a financial advisor with capital markets capabilities, which Blackstone does not have, one of the the two bankers cited above noted.
P&G, Blackstone and Morgan Stanley declined comment.
Once Folgers is spun off, it could draw keen takeover interest from buyers like Sara Lee, the listed Downers Grove, Illinois-based food company, or Tchibo, the private German coffee company, according to a fifth banker.
P&G would have no tax liabilities from a takeover of an independent Folgers, although it also would not enjoy any of proceeds from such a sale, which would go straight to shareholders, the fifth banker added.
P&G is thought to have not yet decided what to do with Duracell and Pringles, the third banker said.
P&G has been searching for a buyer for Folgers for quite some time, and the business has been shown to everyone in the universe of likely buyers, the third banker said.
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