Johnson & Johnson products on a shelf in a store in New York.
Luca Jackson | Reuters
Johnson & Johnson’s Consumer health company Kenvue valued its IPO Wednesday at $22 per share, at the high end of its quoted range, in a boosted deal that would raise about $3.8 billion.
At this IPO price, the new company is valued at around $41 billion. This makes Kenvue’s debut one of the largest US IPOs in more than a year.
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The company expects its 151 million shares to be priced at between $20 and $23 per share, according to a preliminary prospectus it filed with the Securities and Exchange Commission last week.
Proceeds from the offering and all proceeds from related debt financing transactions will go to J&J, however Kenvue will retain $1.17 billion in cash and cash equivalents.
Goldman Sachs, JPMorgan Chase and Bank of America are acting as lead underwriters for the IPO.
The shares will trade on the New York Stock Exchange on Friday under the ticker “KVUE.”
The spinoff, the biggest IPO since electric-vehicle maker Rivian went public in November 2021, may not fully reverse the ailing IPO market that plummeted in 2022. But it could be a sign of life for IPOs in the US
Kenvue’s debut also marks the largest restructuring in J&J’s 135-year history. J&J announced the split in late 2021 to streamline operations and refocus on its pharmaceuticals and medical devices businesses.
Meanwhile, Kenvue is chock full of household names familiar to investors and the general public, like Tylenol, Band-Aid, Listerine, Aveeno, Neutrogena, and J&J’s eponymous baby powder and shampoo.
Here’s everything you need to know about Kenvue’s IPO this week.
J&J will control 91.9% of Kenvue post-IPO — or 90.8% if underwriters exercise their options to purchase additional shares, according to the prospectus filing.
J&J plans to distribute the remaining common shares to its shareholders later this year.
Until then, Kenvue is considered a “controlled entity” under the NYSE’s corporate governance rules, the filing said. This allows Kenvue to avoid certain listing standards, including the requirement that the company’s board of directors be composed of a majority of independent directors.
J&J will generally be able to control matters that shareholders vote on, such as electing 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 several years, the company said in the filing.
According to the filing, global annual sales growth is estimated at around 3% to 4% through 2025.
Kenvue reported 2022 sales of $14.95 billion and net income of $1.46 billion on a pro forma basis. For the first quarter ended April 2, Kenvue estimates revenue of $3.85 billion and net income of approximately $330 million. These first quarter results are preliminary.
Ten of Kenvue’s brands generated sales of at least $400 million last year.
Overall, Kenvue said 2022 sales are “balanced” across the company’s three businesses.
The company’s self-care unit, which includes products for eye care, cough and cold, and vitamins, had net sales of $6 billion in 2022, accounting for 40% of total sales.
Skin health and beauty products accounted for $4.4 billion in net sales last year, or 29% of total sales. These products include shampoos, conditioners, hair loss treatments, and skin care.
And products in the essential health division, including baby products, mouthwash and dental rinses, sanitary protection, and wound care, posted net sales of $4.6 billion, or 31% of total sales.
Each of the three businesses was profitable on an adjusted operating income basis, the company said in the filing.
Kenvue noted that its global footprint is “well balanced geographically,” with approximately half of its 2022 net sales coming from outside North America.
According to the filing, the company will have net debt of $7.75 billion.
Kenvue rounded up several J&J executives to run the company, according to the file.
Thibaut Mongon, executive vice president and global chairman of J&J’s consumer health practice, will serve as CEO of the newly public company. He will also sit on the board.
Paul Ruh, J&J’s chief financial officer of consumer health and a former PepsiCo executive, will serve as CFO, and Meredith Stevens, global vice president of J&J’s consumer health supply chain, will serve as COO.
Kenvue’s Chief People Officer, Chief Corporate Affairs Officer, Chief Technology and Data Officer, Chief Scientific Officer and Group Presidents for various regions around the world are also from J&J.
According to the preliminary prospectus, the executives will lead a team of more than 22,000 employees in 165 countries and 25 own production facilities.
Kenvue’s global headquarters will be in Summit, New Jersey.
Talc Cancer Lawsuits
J&J faces thousands of allegations that its talc baby 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 arising outside of the U.S. and Canada, according to its January IPO filing.
“As stated unequivocally and unequivocally, Johnson & Johnson has agreed to retain all Talk-related liabilities – and to indemnify Kenvue for all costs – arising out of litigation in the United States and Canada,” Erik Haas, Vice President of Litigation at 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 halted nearly 40,000 talk lawsuits in April through mid-June. This decision was part of J&J’s second attempt to settle talc claims in bankruptcy proceedings.
The suspension will give J&J time to seek court approval of its proposed $8.9 billion settlement with the plaintiffs in the Talk cases.
– CNBC’s Leslie Picker contributed to this report.