USA — Johnson & Johnson is aiming for a valuation of US$40 billion for its consumer health unit, Kenvue, according to sources familiar with the matter who spoke to the Wall Street Journal.
The pharmaceutical company is conducting an IPO roadshow this week to generate interest from potential investors, with a goal of raising at least US$3.5 billion in the offering.
However, the IPO market has been down for a year due to inflation, rising interest rates, and banking issues.
In 2022, the number of IPOs dropped by 45%, according to Ernst & Young, and in the first quarter of this year, IPO listings were down 8%, with funds raised down 61% YoY.
J&J announced its intention to spin off its consumer unit and create a new publicly traded company, Kenvue, in November 2021.
The unit posted a 7.4% increase in sales in the first quarter of 2022, largely due to increased sales of over-the-counter products such as Tylenol, Motrin, Imodium, and Nicorette, as well as beauty products like Neutrogena and Aveeno.
Johnson & Johnson’s (J&J) consumer health group, which accounted for 16% of the company’s overall revenue, reported sales of US$14.95 billion in 2022, a 0.5% decline from 2021.
Assuming a successful IPO, Kenvue’s stock would trade on the New York Stock Exchange under the ticker KVUE.
However, it’s important to note that the successful completion of the IPO is not a given, as market conditions and investor interest can be unpredictable.
If the IPO does go through, it would be a significant event for the company and potentially attract more investor dollars to this type of less-risky spinoff venture, as the IPO market has been struggling in recent times due to factors such as inflation and rising interest rates.
During its recent quarterly presentation, J&J made no specific mention of the spinoff, with Chief Financial Officer Joseph Wolk simply stating that the company remains on track to complete the separation of the business in 2023, subject to favorable market conditions.
In the meantime, Kenvue has been operating as a “company within a company”. J&J first announced its intention to spin off its consumer unit in November 2021, with the new company named Kenvue.
In January, the company filed for its IPO and stated that it would retain 80.1% of the voting power of shares of common stock during the IPO, before selling shares in full by the end of the year.
Despite the depressed IPO market, new companies spun out of large corporations, such as Kenvue, are drawing more investor dollars, which could bode well for J&J’s IPO.
However, a sticking point for J&J and Kenvue is the talc litigation, which has led to the company proposing a US$8.9 billion settlement with plaintiffs.
After failing in one bankruptcy attempt for the lawsuits, J&J is attempting another Chapter 11 ploy. The company has taken charge of talc cases in the U.S. and Canada, while Kenvue will handle other cases.
J&J is not alone in spinning off its medtech and consumer health businesses. Other companies that have recently announced or completed similar spinoffs include Baxter International, General Electric, and Siemens Healthineers.
These spinoffs have helped the parent companies focus on their core businesses while unlocking value for shareholders.
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