Shortly after Starboard Value pitched four nominees for Kenvue's board of directors, the consumer healthcare company and its activist investor have signed a "cooperation agreement" that sees Starboard CEO Jeffrey Smith join the board effective immediately.
Besides the Smith appointment, Kenvue revealed that Sarah Hofstetter, president of e-commerce analytics company Profitero, and Erica Mann, Bayer's former consumer head, are joining its board, also effective immediately, according to a March 5 press release.
Under the Kenvue/Starboard agreement, Kenvue’s board will temporarily swell from 11 to 14 directors and be reduced to 13 at the company's annual shareholder meeting. Starboard agreed to a "customary" standstill provision as part of the deal will withdraw its proposed board member candidates, instead voting all of its roughly 22,000 shares in favor of each of Kenvue’s nominees, according to the press release.
Standstill provisions typically cover issues such as stock purchases and shareholder voting rights as part of corporate takeover attempts.
Smith will sit on Kenvue's compensation & human capital committee, while Hofstetter will join the audit committee and Mann will be on the nominating, governance & sustainability committee.
Insights from the new directors will be “very beneficial as the board and management team continue to focus on accelerating sustainable, profitable growth and creating shareholder value,” Kenvue’s chairman, Larry Merlo, said in a company statement.
The company, which markets household brands such as Band-Aid bandages, Listerine mouthwash and pain reliever Tylenol, missed its 2024 net sales growth expectations of 1% to 3% and instead reported 2024 sales growth of just 0.1%. Kenvue expects 2025 to bring a net sales change of -1% to +1% compared with last year.
Starboard has been tuned into Kenvue’s sales woes and last month proposed four candidates to the company’s board of directors, including Smith. In a proxy statement, the firm pressed for “meaningful change” to the board in order to unlock “trapped potential" at Kenvue.
“Despite the company’s promising future prospects, Kenvue has suffered from persistent disappointing and deteriorating financial results, missed commitments, and ineffective board oversight, resulting in stock price underperformance and a significant valuation discount compared to peers,” the activist investor said in its proxy.
The nominations from Starboard came after several discussions with the company, Kenvue noted in its own release in response to the submission.
Kenvue’s shares are currently trading at just over $24.00. Upon its debut, the J&J spinout’s $41 billion IPO was the largest in U.S. markets in more than a year, with shares initially priced at $22 each.
Starboard’s Kenvue saga came shortly after it picked up a $1 billion stake in Pfizer and initiated a proxy fight with the New York-based drugmaker. However, after criticizing the company’s R&D and M&A investments, the investor ultimately declined to nominate directors to Pfizer’s board.