Johnson & Johnson‘s consumer health business, Kenvue, is expected to go public this week in the largest U.S. IPO in more than a year.
That business is chock full of household names familiar to investors and the larger public, such as Tylenol, Band-Aid, Listerine, Aveeno, Neutrogena and J&J’s namesake baby powder and shampoo.
Kenvue is expected to set an IPO price Wednesday night and start trading Thursday morning on the New York Stock Exchange under the ticker “KVUE.”
The company aims to sell more than 151 million shares in the IPO at between $20 to $23 each, the company said in a preliminary prospectus filed with the Securities and Exchange Commission last week. That would raise roughly $3.25 billion at the midpoint price of $21.50.
Proceeds from the offering and any profits from related debt-financing transactions will go to J&J, but Kenvue will retain $1.17 billion in cash and cash equivalents.
Kenvue would be valued at around $40 billion at the proposed share range, based on the 1.87 billion shares expected to be outstanding once the deal closes. J&J would hold nearly all of those outstanding shares, amounting to more than 1.71 billion shares, according to the prospectus.
Goldman Sachs, JPMorgan Chase and Bank of America are acting as the lead underwriters for the IPO.
If successful, Kenvue would be the biggest IPO since EV maker Rivian went public in November 2021.
The spinoff alone may not completely turn around the moribund IPO market, which plummeted in 2022. But it may be a sign of life for initial public offerings in the U.S.
Kenvue’s debut would also mark the largest restructuring in J&J’s 135-year history. J&J announced the split in late 2021 as a bid to streamline operations and refocus on its pharmaceutical and medical device divisions.
Here’s everything else you need to know about Kenvue’s upcoming IPO this week.
Ownership after IPO
J&J will control 91.9% of Kenvue after the IPO — or 90.8% if underwriters exercise their options to purchase additional shares, according to the prospectus filing.
J&J plans to distribute the remaining shares of common stock to its shareholders later this year.
Until then, Kenvue will qualify as a “controlled company” under the corporate governance rules of the NYSE, the filing said. That will allow Kenvue to avoid certain listing standards, including a requirement that the company’s board be composed of a majority of independent directors.
J&J will generally be able to control matters that shareholders vote on, such as the election of directors to Kenvue’s board, the filing said.
“Johnson & Johnson will continue to control the direction of our business, and the concentrated ownership of our common stock may prevent you and other shareholders from influencing significant decisions,” Kenvue said in the filing.
Kenvue is profitable and expects modest growth over the next few years, the company said in the filing.
Annual sales growth through 2025 is projected to be about 3% to 4% globally, according to the filing.
Kenvue posted $14.95 billion in sales for 2022 and a net income of $1.46 billion on a pro forma basis. For the first quarter that ended April 2, Kenvue estimates it raked in sales of $3.85 billion and net income of around $330 million. Those first-quarter results are preliminary.
Ten of Kenvue’s brands had approximately $400 million or more in sales last year.
Overall, Kenvue said 2022 sales were “well balanced” across the company’s three business divisions.
The company’s self care unit, which includes products for eye care, cough and cold and vitamins, generated $6 billion in net sales for 2022, accounting for 40% of total revenue.
Skin health and beauty products accounted for $4.4 billion in net sales last year, or 29% of overall revenue. Among those products are shampoos, conditioners, hair loss treatments and skin care.
And products in the essential health division, including baby products, mouthwash and dental rinses, sanitary protection and wound care, saw $4.6 billion in net sales, representing 31% of all-in revenue.
Each of the three divisions was profitable on an adjusted operating income basis, the company said in the filing.
Kenvue noted that its global footprint is “well balanced geographically,” with roughly half of 2022 net sales coming from outside North America.
The company will have net debt of $7.75 billion, according to the filing.
Kenvue rounded up several J&J executives to helm the company, according to the filing.
Thibaut Mongon, J&J’s executive vice president and worldwide chair of consumer health, will serve as CEO of the newly public company. He will also sit on the board.
Paul Ruh, J&J’s chief financial officer of consumer health and a former PepsiCo executive, will serve as CFO, and Meredith Stevens, J&J’s worldwide vice president of the company’s consumer health supply chain department, will serve as COO.
Kenvue’s chief people office, chief corporate affairs office, chief technology and data officer, chief scientific officer and group presidents for different regions around the world are also from J&J.
The executives will lead a team of more than 22,000 employees across 165 countries and 25 in-house manufacturing sites, according to the preliminary prospectus.
Kenvue’s global headquarters will be in Summit, New Jersey.
J&J faces thousands of allegations that its talc baby powder and other talc products caused cancer. Some of those products fall under the company’s consumer health business.
But Kenvue will only assume talc-related liabilities that arise outside of the U.S. and Canada, according to its IPO filing from January.
“As unequivocally and unambiguously stated, Johnson & Johnson has agreed to retain all the talc-related liabilities – and indemnify Kenvue for any and all costs – arising from litigation in the United States and Canada,” Erik Haas, vice president of litigation for Johnson & Johnson said in a statement last week.
But Kenvue said in the filing that “such indemnity may not be sufficient” to protect the new company against the full amount of liabilities.
J&J will continue battling talc claims in bankruptcy court.
A federal bankruptcy judge last month temporarily halted nearly 40,000 talc lawsuits through mid-June. That decision was part of J&J’s second attempt to settle talc claims in bankruptcy proceedings.
The temporary hold will give J&J time to try to win court approval of its $8.9 billion proposed settlement with plaintiffs in the talc cases.