J&J cuts Kenvue stake by 80% by way of IPO

Kenvue, a unit of Johnson & Johnson’s consumer health business.

CFOTO | Future Publishing | Getty Images

Johnson&Johnson announced on Monday that the company plans to reduce its stake in Kenvue, the consumer healthcare company it spun off as an independent company earlier this year, by at least 80% via an IPO.

J&J owns 89.6% of Kenvue common stock, representing more than 1.72 billion shares.

The exchange offer, also known as a demerger, allows J&J shareholders to exchange all or a portion of their shares for common shares of Kenvue at a discount of 7%. The offer is expected to be tax-free, J&J said in a press release.

The company noted that the spin-off is voluntary for investors and should close on August 18, well ahead of expectations.

J&J said it received a waiver removing the lockup period related to Kenvue’s IPO in May. Because of that lockup agreement, J&J would have had to wait 180 days to sell its shares.

“We believe now is the right time to distribute our Kenvue shares and we are confident that a demerger is the right way to deliver value for our shareholders,” said Joaquin Duato, J&J CEO, in a statement.

Duato added that the spin-off will sharpen J&J’s focus on its pharmaceuticals and medical devices businesses — both of which helped the company beat second-quarter sales and adjusted earnings last week.

J&J first announced its intention to launch an exchange offer in its second-quarter earnings report on Thursday, but the company offered few details on the plan. Shares of Kenvue fell after the announcement, although second-quarter results also beat Wall Street estimates.

When asked about J&J’s proposed exchange offering on Thursday, Kenvue CEO Thibaut Mongon told CNBC’s Squawk on the Street that the company was “pleased with the way the IPO has been received by shareholders.”

“We see great consensus among our new investors in recognizing the potential of Kenvue, but I can tell you that we are fully prepared to launch as a fully independent company,” he said.

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