Band-Aid, Aveeno, Tylenol, Neutrogena, Zyrtec and Listerine.
How much value do these iconic products and others in the consumer health business of Johnson & Johnson have?
That’s the question the company faces as it prepares to spin out its Kenvue unit in an initial public offering. J&J is conducting an IPO roadshow this week to drum up interest from investors, sources told The Wall Street Journal. They also said that J&J hopes to raise at least $3.5 billion in the offering at a valuation of $40 billion.
In a release, J&J later confirmed (PDF) the move saying it is offering 151,204,000 shares of Kenvue's common stock. The IPO price J&J expects is between $20 and $23 per share. The company has applied to list its stock as "KVUE" on the New York Stock Exchange.
During its quarterly presentation last week, J&J said little to indicate that the spinoff was approaching.
“We remain on track to complete the separation of this business in 2023, assuming accommodative market conditions,” Chief Financial Officer Joseph Wolk said Thursday.
In the meantime, Kenvue has been operating as a “company within a company," Wolk added.
In November of 2021, J&J revealed its intention to follow an industry trend in turning its consumer unit into a new publicly traded company. Seven months ago, J&J said the new company would be named Kenvue.
Then, in January, the company filed for its IPO. On Monday, J&J said that it will still own 91.9% of the total outstanding shares of Kenvue’s common stock after the IPO, with plans to sell the rest by the end of the year.
J&J reported consumer health sales of $14.95 billion in 2022, a 0.5% decline from 2021. The group accounted for 16% of the company’s overall revenue.
In the first quarter, Kenvue posted a 7.4% increase in sales, thanks largely to a 12.4% bump in sales of over-the-counter products such as Tylenol, Motrin, Imodium and Nicorette. A 9.7% increase in sales of beauty products Neutrogena and Aveeno helped as well.
The IPO market has been depressed for a year as companies wait out inflation, rising interest rates and banking issues. In 2022, there was a 45% drop (PDF) in IPOs, according to Ernst & Young. The trend continued in the first quarter with IPO listings down 8% and funds raised from those efforts down 61% year over year.
Boding well for J&J’s IPO, however, is that less-risky ventures, such as new companies carved out of large corporations, are drawing more investor dollars.
One sticking point for J&J and Kenvue is talc litigation. After failing in one bankruptcy attempt for the lawsuits, J&J is attempting another Chapter 11 ploy and proposing an $8.9 billion settlement with plaintiffs.
J&J said that it has taken charge of talc cases based in the U.S. and Canada, while Kenvue will handle those in other countries.