Johnson & Johnson (J&J) announced on Monday its plans to significantly reduce its stake in Kenvue, the consumer health business it spun out earlier this year. Through a stock exchange offer, J&J aims to cut its stake in Kenvue by at least 80%. The exchange offer will allow J&J shareholders to swap all or part of their shares for Kenvue’s common stock at a 7% discount. This move is part of J&J’s effort to focus on its pharmaceutical and medtech businesses.
J&J currently owns 89.6% of Kenvue’s common stock, which amounts to more than 1.72 billion shares. The exchange offer is expected to be tax-free and voluntary for investors. The deadline for the split-off is set for August 18, which is earlier than initially anticipated.
One significant development enabling this transaction is the waiver received by J&J, which allows the company to bypass the share lockup period associated with Kenvue’s initial public offering in May. The lockup agreement would have obliged J&J to wait 180 days before selling any of its Kenvue shares.
J&J CEO Joaquin Duato expressed confidence in the split-off, stating, “We believe now is the right time to distribute our Kenvue shares, and we are confident that a split-off is the appropriate path forward to bring value to our shareholders.” Duato further noted that the move would sharpen J&J’s focus on its pharmaceutical and medtech businesses, which contributed significantly to the company’s second-quarter revenue and adjusted earnings beating expectations last week.
Shares of J&J rose by around 1% in premarket trading on Monday, while Kenvue’s stock experienced a decline of nearly 3%. The announcement of the exchange offer took place last Thursday in J&J’s second-quarter earnings report, but few details were provided at that time. Kenvue CEO Thibaut Mongon expressed satisfaction with the IPO’s reception by shareholders, stating, “We see a lot of alignment among our new investors in seeing the potential of Kenvue, but I can tell you that we are fully ready to leave as a fully independent company.”
J&J’s move to reduce its stake in Kenvue highlights the company’s strategic decision to focus on its core businesses and unlock value for its shareholders. This split-off is likely to shape the future trajectory of both J&J and Kenvue.