Johnson & Johnson (J&J) announced plans to reduce its stake in its consumer healthcare spin-off, Kenvue, by at least 80% via a stock exchange offer. The offer will allow J&J shareholders to exchange all, some, or none of their shares of J&J common stock for Kenvue shares at a 7% discount. Kenvue launched as a stand-alone independent publicly traded company in May (May 2023).  

J&J now owns 89.6% of Kenvue’s common stock, which amounts to more than 1.72 billion shares. J&J says that it plans to reduce that holding by at least 80.1% and is offering to exchange up to approximately 1.53 billion shares of Kenvue common stock for outstanding shares of J&J common stock in the exchange offer. The exchange offer is expected to be tax-free for US federal income tax purposes. 

The stock exchange offer or split-off is voluntary and will close on August 18, 2023. J&J said it received a waiver that dismisses the share lockup period associated with Kenvue’s initial public offering, which would have required J&J to wait 180 days to sell any of its shares. 

The exchange offer will permit J&J sareholders to exchange some, all or none of their shares J&J common stock for shares of Kenvue common stock at a 7% discount, subject to an upper limit of 8.0549 shares of Kenvue common stock per share of J&J common stock tendered and accepted in the exchange offer. If the upper limit is not in effect, tendering shareholders are expected to receive approximately $107.53 of Kenvue common stock for every $100 of J&J common stock tendered. 

J&J will determine the prices at which shares of J&J common stock and shares of Kenvue common stock will be exchanged by reference to the arithmetic average of the daily volume-weighted average prices of shares of J&J common stock and Kenvue common stock on the New York Stock Exchange during the three consecutive trading days ending on and including the second trading day preceding the expiration date of the exchange offer, which are expected to be August 14, 15 and 16, 2023, if the exchange offer is not extended or terminated. The final exchange offer, if not extended or terminated, would be August 18, 2023. 

The move is part of a larger strategy by J&J to focus on its pharmaceutical and medical device businesses. J&J had first announced in November 2021 its plans to split J&J into two separate, stand-alone, publicly traded companies, one focused on pharmaceuticals and medical devices, and the other on consumer health.   

“The separation of Kenvue further sharpens Johnson & Johnson’s focus on transformational innovation specifically in Pharmaceutical and MedTech,” said Joaquin Duato, J&J’s Chairman and CEO, in a July 24, 2023, statement. “We believe now is the right time to distribute our Kenvue shares, and we are confident that a split-off is the appropriate path forward to bring value to our shareholders.” 

Source: Johnson & Johnson