Source – Johnson & Johnson
With the completion of Johnson & Johnson’s consumer health spinoff, the company is now redirecting its attention away from Kenvue and refocusing on its core businesses, primarily in the pharmaceutical and medtech sectors. To achieve this, J&J is implementing a stock exchange offer, commonly known as a split-off, aiming to reduce its stake in Kenvue by approximately 80%. The exchange offer, expected to be tax-free, allows J&J shareholders to exchange some or all of their common stock for Kenvue shares.
The primary objective behind the separation of the company and the extensive split-off plan is to enhance J&J’s focus on its core businesses. Joaquin Duato, J&J’s CEO, stated that the move is intended to sharpen the company’s strategic direction.
The Kenvue spinoff was officially completed in early May, with the consumer group listed on the New York Stock Exchange at $22 per share. As of now, J&J holds around 90% of Kenvue’s total outstanding shares, approximately 1.7 billion shares.
To further reduce its stake, J&J is offering to exchange up to 1.54 billion shares of Kenvue common stock for outstanding shares of J&J at a discounted rate of 7%, potentially reaching a total value of $36 billion based on Kenvue’s current share price of nearly $24.
If the exchange offer does not attract full participation, J&J plans to sell the remaining Kenvue shares and distribute the proceeds among its shareholders. The split-off is voluntary for investors and is scheduled to close on August 18, according to J&J’s release.
During the company’s second-quarter earnings presentation in 2023, J&J expressed its intentions for the split-off, reporting $25.5 billion in sales, surpassing analyst expectations of $24.6 billion. The strong performance led the company to increase its annual sales guidance to a range of $98.8 billion to $99.8 billion. Notably, the pharmaceutical sector contributed $13.7 billion to the second-quarter revenue, showing a 6% year-over-year growth. J&J has set a target to achieve $57 billion in annual pharmaceutical sales by 2025.
In the pharmaceutical industry, Novartis has also offered its investors an exit plan. Following the conclusion of a $15 billion share buyback program, Novartis revealed another stock repurchase plan of the same size, coinciding with the anticipated spinoff of its generics unit Sandoz.
