Kimberly-Clark has placed an ambitious bet on a troubled counterpart, agreeing to buy out Johnson & Johnson’s consumer health spinout Kenvue for $48.7 billion.
While the deal creates a consumer health conglomerate that the companies expect will generate annual revenue of $32 billion, it also brings concerns for Irving, Texas-based Kimberly-Clark, as Kenvue’s top-selling product, Tylenol, faces an uncertain future. Another issue clouding the transaction is Kenvue’s responsibility for talc litigation outside of the U.S. and Canada.
As for Tylenol, President Donald Trump has made unfounded claims that the pain-relief medicine has been linked to autism when used during pregnancy. Meanwhile, Kenvue is contesting a petition for the FDA to include a notice on its label warning pregnant women that use of Tylenol can increase the risk of “developmental problems” for their children.
“We reviewed this transaction in the same way that we run the business—with incredible rigor, thoughtfulness and discipline,” Kimberly-Clark CEO Mike Hsu said during a conference call when asked about the talc and Tylenol issues. “The board carefully considered all the risks and all the opportunities. We had multiple sessions with the board with the world’s foremost scientific, medical, regulatory and legal experts. Going through that process multiple times, I think the work affirmed that this is a generational value creation opportunity for both companies.”
Kenvue CEO Kirk Perry added that his company “stands firmly behind the science and the safety of our products.”
As part of the deal, Kenvue investors receive $3.50 per share, as well as 0.14625 of Kimberly-Clark shares for each Kenvue share held at closing. The total consideration to Kenvue investors is $21.01 per share based on the closing price of Kimberly-Clark shares from Friday, the companies explained. The buyout gives Kenvue a value of roughly $48.7 billion, according to the Monday press release.
Upon close of the deal—which is expected to come in the second half of next year—Kimberly-Clark shareholders will to own roughly 54% of the combined company, while Kenvue shareholders receive 46%.
By mid-morning on Monday, Kenvue’s share price increased by 15% while Kimberly-Clark’s shares were down by 13%. The buyout reverses Kenvue’s skid this year, in which its share price had fallen by 33%.
Analysts at Morningstar called the deal a "significant shift" for Kimberly-Clark, which has been in a slim-down phase.
"Despite bolstering the scale of the combined firm, we foresee sizable integration risk," Morningstar wrote. "Wide-moat Kenvue has faced challenges since its split from wide-moat Johnson & Johnson in 2023, as it has been slow to embed key tenets for competing in the intensely competitive consumer packaged goods space."
It’s been a tumultuous year for Kenvue as the company has faced investor activism and a CEO transition from Thibaut Mongon to Perry. On the same day in July when it revealed the CEO switch, Kenvue also said that sales were down 4% in the second quarter. With Monday’s announcement of the buyout, Kenvue did not reveal its third-quarter results.
The deal brings together Kimberly-Clark—which markets consumer staples such as Huggies, Kleenex and Depend—with Kenvue. Besides Tylenol, some of the top brands for the New Jersey-based company are Aveeno, Band-Aid, Listerine and Neutrogena.
Kimberly-Clark estimates synergies of $2.1 billion with the buyout, which will be accretive to its adjusted earnings per share by the second year after close.
“It was definitely not opportunistic, definitely strategic,” Hsu said of the transaction. “Kenvue was always the belle of the ball for me, because of the great collection of brands and capabilities that the company has.”