On Aug. 7, Kimberly-Clark announced its intention to acquire Kenvue in a cash-and-stock transaction valued at about $48.7 billion. It’s a make-or-break moment for Kenvue, whose shares are down almost 30% since going public. This decline results from a perfect storm of challenges and pressures from activist investors.
Kenvue, Johnson & Johnson’s spinoff focused on consumer health products, such as Tylenol and Band-Aids, has experienced major obstacles. The company now finds itself under existential threat from a lawsuit filed by the Texas attorney general. The lawsuit alleges that Kenvue and its parent company concealed dangers associated with specific medications known to adversely affect children’s brain development. This ongoing legal battle is part of a larger push to hold Kenvue accountable for the safety and transparency of their products.
Kenvue had a rocky legal debut last month. To add insult to injury, their stock began crashing as soon as the new Trump administration floated the prospect of a connection between using Tylenol in pregnancy and autism. In the immediate following of this announcement, Kenvue stock experienced a significant drop. But after extreme volatility during early trading today, the stock bounced back dramatically, increasing 17% in value to break the $16 barrier.
And it hasn’t all been smooth sailing this year for Kenvue. All together, their sales are down almost 4% through the first nine months compared to last year. The company is still facing a torrent of legal challenges from its formerly popular baby powder. Most of these lawsuits allege that the product causes cancer risk. Asbestos in talc A recent lawsuit in the UK accused Johnson & Johnson of intentionally marketing infant powder laced with asbestos for decades. This disclosure has deepened the mistrust that the public already feels towards Kenvue’s products.
Kenvue shareholders would be in line to get roughly $21 per share as part of the proposed transaction. This value consists of $3.50 in cash and a fractional share of Kimberly-Clark. This merger will result in a consumer goods powerhouse. It pairs Kenvue’s well-loved brands with Kimberly-Clark’s deep brand equity, reuniting shoppers with the products they know and love, from Kleenex to Huggies.
Collectively, the new combined company, Roadshow—its name, a combination of Chevron and Hydrotec’s former corporate names—hopes to produce $32 billion in revenues this year. Executives from both companies sounded positive notes about the merger’s ability to shake up the market during the call.
“With a broader product range and greater reach, the combined company will be a global health and wellness leader.” – Kimberly-Clark and Kenvue executives
Look for that transaction to close in the second half of next year. This strategic decision will position both Kimberly-Clark and Kenvue for extensive growth opportunities in an extremely competitive consumer sector. As they work their way through these changes, all stakeholders will undoubtedly be tracking closely to see how this acquisition affects the future of both companies.