GILLETTE TO ACQUIRE DURACELL : FOREIGN MARKET FOR BATTERIES WOULD GROW.

Byline: Chris Reidy and Alex Pham The Boston Globe

Looking to dominate yet more shelf space in drugstores and supermarkets around the world, Gillette Co. officials Thursday announced plans to acquire Duracell International Inc.

The deal, valued at more than $7.8 billion, is expected to be completed by the end of the year. The world's No. 1 maker of razor blades will acquire the world's largest maker of alkaline batteries.

Gillette will become a $9 billion consumer-products behemoth, selling everything from Right Guard deodorants to Braun hair dryers to Liquid Paper correction fluid to Duracell flashlight batteries.

``At the checkout counters, there's going to be nobody who can touch the magnitude of what we'll be able to do,'' said Alfred M. Zeien, Gillette's chairman and chief executive.

Mergers often mean layoffs, and cutbacks may be made at Duracell's headquarters in Bethel, Conn. Boston-based Gillette may add staff.

Gillette employs more than 33,000 workers worldwide. Duracell employs about 9,000.

Wall Street applauded the deal as an excellent fit. Duracell's stock soared 9 points Thursday - more than 18 percent - to 58-1/8 on the New York Stock Exchange. Gillette's stock rose -7/8 to close at 66 on the Big Board.

Both companies use similar merchandising and marketing strategies.

``We were searching for ways to get broader distribution, and we've just found our answer in Gillette,'' said Charles R. Perrin, Duracell's chief executive.

Gillette does business in more than 200 countries and expects to see almost immediate benefits from opening big international markets to Duracell. About 70 percent of Gillette's $6.8 billion in sales last year came from overseas. Only about half of Duracell's $2.3 billion in sales came from abroad.

Zeien said he expects that the companies ultimately will save $80 million to $120 million in annual costs by joining forces.

For Gillette, the announcement capped a five-year search for an appropriate acquisition and an eight-month courtship of Duracell. Gillette wanted a company that makes products that Gillette's renowned research and development department could upgrade, according to Stephen F. East, an A.G. Edwards analyst.

In dollar terms, Duracell claims about 50 percent of the domestic market for alkaline batteries.

Salomon Brothers analyst Diana Temple said the battery is ``a functional product that can be improved with R&D.''

A Duracell acquisition also offers Gillette opportunity to make some of its products battery-operated, East said. Gillette makes a host of electronic products such as shavers and coffee makers.

Under the proposed deal, which still must be approved by shareholders of both companies, Gillette will swap 0.904 of a share for each share held by Duracell investors and will pay about $59.77 for each Duracell share.

To complete the transaction, Gillette will issue about 108 million new shares of stock. To cover restructuring costs, Gillette will set aside $275 million in the fourth quarter and $55 million for various fees when the deal closes.

The deal could mean a bonanza for Kohlberg Kravis Roberts & Co. The New York investment firm, which holds a 34 percent stake in Duracell, stands to make a $3 billion profit on an initial investment of $350 million. KKR will own about 7 percent of Gillette stock on completion of the deal.