When a long-established company gets into trouble because of class action lawsuits, it can do many things, pay the bill, but that is expensive; spin off the division to a new company and the new management can look after it, and there are other actions. This is what lead to the creation of Kenvue. The long-established parent company Johnson & Johnson (J&J) spun off its consumer product division to establish Kenvue. The brands include: Band-Aid, Benadryl, Zyrtec, Listerine, Tylenol, Visine, Baby Powder, Johnson’s Baby Shampoo and others. If you are in an average household, you likely have one or more products in your house. Many of those brands are billion-dollar brands, but the likelihood of high growth is limited.

In an article by Lauren Hirsch and Rebecca Robbins of the New York Times News Service, Kimberly-Clark the consumer products giant that owns Kleenex and Huggies said it agreed to spend about $40 billion for Kenvue.

Even though the brands are doing ok, the growth rate for the consumer products was not good enough for some investors. In March, the investment firm Starboard bought a stake in the company, had its CEO Jeffrey Smith elected to the Board of Directors and started a review of the company’s strategy.

Under the terms of the cash and stock deal with Kenvue, Kimberly-Clark would own 54% of the company. The combined company should generate about $32 billion in annual revenue and $7 billion in operating profit. The synergy potential is $2 billion in cost cutting in 3 years.

The deal would close in the second half of 2026 subject to regulatory approvals and approvals from shareholders. The corporate offices of Kenvue would shift to Kimberly-Clark’s head office in Irving, Texas.

Linking to dividend paying stocks, when a company is diversified and lawsuits come against it, there are always a number of methods to deal with it, without causing existing shareholders to pay for it, if the company loses the lawsuit. Spinning off a division is a good example, so the existing company can be seen as and experience higher growth multiples which translates into high stock prices. And that is a good thing for investors.

There are more questions than answers, till the next time – to raising questions.