What you need to know about the spinoff of the consumer health business

  • Johnson & Johnson’s Kenvue consumer health business is expected to go public this week in the biggest U.S. IPO in more than a year.
  • Kenvue is expected to price an initial public offering on Wednesday evening and trade on Thursday morning.
  • The spinoff will be listed on the New York Stock Exchange under the ticker “KVUE.”
  • This business unit is filled with household names such as Tylenol, Band-Aid, Listerine, Aveeno, Neutrogena, and J&J’s eponymous baby powder and shampoo.

Johnson & Johnson products on a shelf in a store in New York.

Lucas Jackson | Reuters

Johnson & Johnson’s consumer health business, Kenvue, is expected to go public this week in the biggest U.S. IPO in more than a year.

This business is filled with household names familiar to investors and the general public, such as Tylenol, Band-Aid, Listerine, Aveeno, Neutrogena, and J&J’s eponymous baby powder and shampoo.

Kenvue is expected to set an IPO price Wednesday night and begin trading Thursday morning on the New York Stock Exchange under the ticker “KVUE.”

The company aims to sell more than 151 million shares in the IPO at a price between $20 and $23 each, the company said in a preliminary prospectus filed with the Securities and Exchange Commission last week. This will raise approximately $3.25 billion at an average price of $21.50.

Proceeds from the offering and any proceeds from related debt financing transactions will go to J&J, but Kenvue will retain $1.17 billion in cash and cash equivalents.

Kenvue will be valued at about $40 billion at the proposed stock range, based on 1.87 billion shares expected to be outstanding after the transaction closes. J&J will hold nearly all of those shares outstanding, amounting to more than 1.71 billion shares, according to the prospectus.

Goldman Sachs, JPMorgan Chase and Bank of America are acting as lead underwriters for the IPO.

If successful, Kenvue would be the largest IPO since EV maker Rivian went public in November 2021.

The spinoff alone may not completely turn around the moribund IPO market, which collapsed in 2022. But it could be a sign of life for U.S. IPOs

Kenvue’s debut will also mark the largest restructuring in J&J’s 135-year history. J&J announced the split in late 2021 as an effort to streamline operations and refocus on its pharmaceutical and medical divisions.

Here’s everything else you need to know about Kenvue’s upcoming IPO this week.

J&J will control 91.9 percent of Kenvue after the IPO — or 90.8 percent if the underwriters exercise their options to buy additional shares, according to the prospectus filing.

J&J plans to distribute the remaining common stock to its shareholders later this year.

Until then, Kenvue will qualify as a “controlled company” under the NYSE’s corporate governance rules, the filing said. This would allow Kenvue to avoid certain listing standards, including a requirement that the company’s board consist of a majority of independent directors.

J&J will generally be able to control matters on which shareholders vote, such as the election of directors to Kenvue’s board, the filing said.

“Johnson & Johnson will continue to control the direction of our business, and concentrated ownership of our common stock may prevent you and other shareholders from influencing important decisions,” Kenvue said in the filing.

Kenvue is profitable and expects modest growth over the next few years, the company said in a filing.

Annual sales growth through 2025 is expected to be around 3% to 4% globally, according to the filing.

Kenvue reported $14.95 billion in sales for 2022 and net income of $1.46 billion on a pro forma basis. For the first quarter ended April 2, Kenvue estimates it had sales of $3.85 billion and net income of about $330 million. These first quarter results are preliminary.

Ten of Kenvue’s brands had approximately $400 million or more in sales last year.

Overall, Kenvue said sales in 2022 were “well balanced” across the company’s three business divisions.

The company’s self-care division, which includes eye care, cough and cold products and vitamins, will generate $6 billion in net sales for 2022, accounting for 40% of total revenue.

Skin health and beauty products accounted for $4.4 billion in net sales last year, or 29% of total revenue. These products include shampoos, conditioners, hair loss treatments and skin care products.

And products in the core health division, including baby products, mouthwash and dental rinses, sanitary protection and wound care, posted $4.6 billion in net sales, representing 31% of total revenue.

Each of the three divisions is profitable on an adjusted operating income basis, the company said in a filing.

Kenvue noted that its global footprint is “well balanced geographically,” with approximately half of net sales in 2022 coming from outside North America.

The company will have net debt of $7.75 billion, according to the filing.

Kenvue brought together several J&J executives to lead the company, according to the filing.

Thibaut Mongon, J&J’s executive vice president and global chairman of consumer health, will serve as CEO of the new public company. He will also sit on the board.

Paul Roux, J&J’s chief financial officer for consumer health and a former PepsiCo executive, will serve as chief financial officer, and Meredith Stevens, J&J’s global vice president for consumer health supply chain, will serve as chief operating officer.

Kenvue’s headquarters, chief corporate affairs office, chief technology and data officer, chief scientific officer and group presidents for various regions around the world are also from J&J.

The executives will lead a team of more than 22,000 employees in 165 countries and 25 domestic manufacturing sites, according to the preliminary prospectus.

Kenvue’s global headquarters will be in Summit, New Jersey.

J&J is facing thousands of allegations that their talcum powder and other talc products cause cancer. Some of these products fall under the company’s consumer health business.

But Kenvue will only take on talc-related liabilities that arise outside the U.S. and Canada, according to its January IPO filing.

“As clearly and unequivocally stated, Johnson & Johnson has agreed to retain all talc-related liabilities – and indemnify Kenvue for any and all costs – arising from litigation in the United States and Canada,” Eric Haas, Vice President of Litigation of Johnson & Johnson said in a statement last week.

But Kenvue said in the filing that “such compensation may not be sufficient” to protect the new company against the full amount of the liabilities.

J&J will continue to fight talc claims in bankruptcy court.

A federal bankruptcy judge last month temporarily halted nearly 40,000 talcum powder cases until mid-June. That decision was part of J&J’s second attempt to settle talc claims in bankruptcy proceedings.

The temporary stay will give J&J time to try to win court approval for a proposed $8.9 billion settlement with plaintiffs in the talc lawsuits.

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