Thibaut Mongon, CEO, and Paul Ruh, CFO of Kenvue Inc., Johnson & Johnson’s consumer-health business, pose together during the company’s IPO at the New York Stock Exchange (NYSE) in New York City, U.S., on May 4, 2023.
Brendan McDermid | Reuters
Johnson & Johnson announced that its shareholders will soon have the opportunity to exchange their shares for stock of Kenvue, an independent consumer health company that recently spun out from Johnson & Johnson.
According to J&J CFO Joseph Wolk’s statement during the company’s second-quarter earnings call, J&J owns nearly 90% of Kenvue shares and plans to reduce its stake through an exchange offer, which could launch in the coming days, depending on market conditions.
This exchange offer, also known as a split-off, will allow J&J shareholders to exchange some or all of their shares for Kenvue’s common stock. Further details about the offer were not provided by J&J.
Wolk believes that a split-off is the most advantageous form of separation for J&J. He also expects that after the split, Kenvue will attract a shareholder base interested in owning its stock.
In response to J&J’s exchange offer, Kenvue CEO Thibaut Mongon expressed satisfaction with how the IPO has been received by shareholders. He stated in an interview with CNBC’s “Squawk on the Street” that Kenvue is fully prepared to operate as an independent company.
Despite beating earnings and revenue estimates in its first quarterly report since going public, Kenvue’s shares experienced a decline following the announcement. Kenvue also announced a quarterly cash dividend of about 20 cents per share for the upcoming third quarter.
J&J’s second-quarter results exceeded expectations, leading to a 6% increase in the company’s stock.
Prior to this announcement, J&J did not disclose whether it would divest its Kenvue shares through a split-off or a spinoff. The latter option would involve distributing Kenvue stock to existing J&J shareholders instead of offering an exchange.
The timing of the exchange offer came as a surprise, as Kenvue’s IPO filing in April stated that J&J agreed to wait 180 days before selling or transferring its shares of the new company. This would have postponed any split-off until at least the end of October. Additionally, written permission from Goldman Sachs and JPMorgan Chase, the lead underwriters of the IPO, would be required for J&J to proceed with the split-off.
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