Kimberly-Clark acquires Neutrogena-owner Kenvue

Kimberly-Clark is laying down $40 billion to purchase Kenvue in a large deal that has puzzled some traders because the Tylenol maker struggles with weak gross sales, lawsuits and White House assaults linking its painkiller to autism.

Shares of Kimberly-Clark dropped sharply after the Monday announcement as stockholders scrutinized the 46% premium being paid for the previous Johnson & Johnson unit that has had a turbulent yr: Kenvue ousted its CEO in July and has been below fireplace from President Donald Trump over unproven claims that Tylenol use throughout being pregnant may cause autism in youngsters.

Kenvue shares, which had dropped sharply since Trump’s feedback, jumped as a lot as 19.6% on Monday. Many traders have been awaiting a sale of all or elements of the corporate for months, following activist stress.

Kimberly-Clark had admired Kenvue for years, going again to when it was nonetheless a part of J&J, and considered it as a goal, however deal talks between the businesses began after Kenvue introduced it was reviewing strategic options and the departure of its CEO over the summer season, sources accustomed to the matter instructed Reuters.

Jay Woods, chief market strategist at Freedom Capital Markets, stated the market response suggests some traders consider Kimberly-Clark “may be buying damaged goods”.

Despite the issues, Kimberly-Clark forecast $2.1 billion in annual value financial savings from the deal, with the addition of Kenvue’s huge portfolio of manufacturers from Listerine mouth wash to skincare names like Aveeno and Neutrogena anticipated to herald annual revenues of roughly $32 billion for the mixed firm.

Both firms sit aspect by aspect on retailer cabinets, so the dimensions and distribution logic make sense even when the Tylenol overhang stays a shadow any purchaser would fairly keep away from, stated Kimberly Forrest, chief funding officer at Bokeh Capital Partners.

“Kimberly-Clark will take on potential litigation risk for the Tylenol brand… This is hard to quantify,” stated TD Cowen analyst Robert Moskow.

There are issues round Kenvue’s potential authorized publicity to lots of of personal lawsuits alleging the corporate hid supposed hyperlinks between Tylenol and autism or consideration deficit hyperactivity dysfunction in youngsters.

While U.S. Health and Human Services Secretary Robert F. Kennedy Jr. not too long ago stated there is no such thing as a conclusive proof of such a hyperlink, he referred to as present knowledge “very suggestive.”

U.S. gross sales of Tylenol fell 11% between September 20 and October 4 after the Trump administration’s remarks, BNP Paribas analyst Navann Ty stated in a be aware final month.

Kenvue can be battling litigation tied to its talc-based child powder merchandise.

“Most investors expected Kenvue to sell off select brands, not the entire company, given the Tylenol and talc overhangs. But Kimberly-Clark likely saw long-term value in a strong brand portfolio trading at a steep discount,” stated James Harlow, senior vice chairman at Novare Capital Management.

Kenvue traders cheered the deal.

One long-term investor who has spoken with the board and administration over the past months referred to as the deal “awesome”, whereas some others stated the value was not so good as they might have hoped for 2 months in the past, earlier than the corporate got here below fireplace from the White House.

“They did have a long slog ahead of them … I think they must have looked at the situation and … had the opportunity to sell the whole company. That’s the most simple of transactions,” Harlow stated, including that promoting off particular person manufacturers would have taken a very long time.

Kenvue has lengthy struggled with weak point in its core companies, particularly the pores and skin well being and wonder phase – a problem activist traders have beforehand flagged. The firm stated on Monday third-quarter gross sales on the pores and skin well being phase fell 3.2% to $1.04 billion.

“One of our challenges at Kenvue right now is we’re living in between, which is no place to live – in the murky middle,” stated Kirk Perry, who was named everlasting CEO of Kenvue earlier within the day.

Kimberly-Clark can be navigating a client items atmosphere more and more fraught with a extra value-seeking shopper, forcing firms, together with sector bellwether Procter & Gamble to spend money on smaller pack sizes, and trim underperforming enterprise models.

It offered a majority stake in its worldwide tissue enterprise to Brazilian pulp maker Suzano, as a part of a restructuring, proceeds from that are anticipated to assist the Kenvue buyout, the corporate stated on Monday.

“Kimberly-Clark has been discussing its ‘transformation’ for some time now, but do think this feels like very early days to be nearly doubling the size of the company,” Barclays analysts stated.

Kenvue’s shareholders will obtain $3.50 per share and 0.15 Kimberly-Clark shares for every Kenvue share held. That implies an fairness worth of $40.32 billion, in keeping with Reuters calculations.

The deal, anticipated to shut within the second half of 2026, will likely be financed by way of a mixture of money and debt, with dedicated funding from JPMorgan Chase Bank.

Either get together could also be required to pay a $1.12 billion termination price in money if the deal falls by way of, in keeping with a regulatory submitting.
Upon closing, Kimberly-Clark’s CEO Mike Hsu will take over as the highest boss and chairman of the mixed firm.