Johnson & Johnson (J&J) has revealed its intention to significantly reduce its stake in Kenvue, the consumer health business that was spun off as an independent entity earlier this year.
The plan involves a stock exchange offer, wherein J&J aims to cut at least 80% of its ownership in Kenvue.
Currently, J&J holds a substantial 89.6% of Kenvue’s common stock, amounting to over 1.72 billion shares.
Through the exchange offer, known as a split-off, J&J shareholders will have the opportunity to trade all or a portion of their J&J shares for Kenvue’s common stock at a 7% discount. According to J&J, this offer is expected to be tax-free.
The split-off is voluntary for investors and is scheduled to be completed on August 18, which is notably earlier than initially anticipated.
In a bid to accelerate the process, J&J secured a waiver that removes the share lockup period associated with Kenvue’s initial public offering in May.
This lockup agreement previously mandated that J&J had to wait for 180 days before selling any of its Kenvue shares.
Joaquin Duato, CEO of J&J, expressed confidence in the decision, stating, “We believe now is the right time to distribute our Kenvue shares, and we are confident that a split-off is the appropriate path forward to bring value to our shareholders.”
He further explained that the split-off aligns with J&J’s strategy to concentrate on its pharmaceutical and medtech businesses, which notably contributed to the company’s positive performance in second-quarter revenue and adjusted earnings.
In response to the announcement of the exchange offer during J&J’s second-quarter earnings report, Kenvue CEO Thibaut Mongon spoke favorably about the response from shareholders.
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Despite Kenvue’s impressive second-quarter results that surpassed Wall Street estimates, the announcement caused a decline in Kenvue’s share value.
The exchange offer marks a significant step for J&J as it looks to reshape its portfolio and focus on its core businesses, while also providing Kenvue with more independence as a separate company.
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