Quiver Quantitative - Johnson & Johnson (JNJ) announced its intention to maintain approximately a 9.5% stake in its newly separated consumer health unit, Kenvue (KVUE) after completing a share exchange offer. The offer allowed J&J stockholders to exchange their shares for those of Kenvue. The exchange, which was largely oversubscribed, resulted in J&J holders swapping just 23.8% of their shares for Kenvue's. Kenvue, which was made public by J&J in May, houses renowned brands such as Tylenol, Listerine, and Band-Aid.
The exchange offer, initiated in July, witnessed significant interest from J&J shareholders, with around 803 million J&J shares (or about 30% of its total outstanding stock) being tendered. An exception was made for J&J shareholders who held fewer than 100 shares; these shareholders weren't subject to the proration. As an incentive, J&J offered its shareholders approximately $107.50 in Kenvue stock for every $100 in J&J shares swapped.
Kenvue shares saw a rise in early trading after the offer, increasing by 1.7% to $23.25, while J&J shares declined by 2.1% to $168.82. The rise in Kenvue stock is attributed to its expected inclusion in the S&P 500 index, a decision which may be announced soon. This bullish trajectory is further supported by Citi analyst Filippo Falorni, who predicts an outperformance in the coming weeks for Kenvue based on its fundamental strengths.
Following the exchange, J&J will exchange nearly 191 million of its shares for 1.53 billion Kenvue shares, retaining a 9.5% stake in Kenvue which amounts to roughly 180 million shares. Despite some analysts expecting J&J to exchange its entire Kenvue stake, J&J opted to maintain an interest in the consumer-health company. The exchange offer essentially acts as a large-scale stock buyback, funded by Kenvue stock, resulting in J&J retiring about 7% of its shares.
This article was originally published on Quiver Quantitative