Shares in diaper group Kimberly-Clark (KMB) collapsed 15% today as investors held their nose over its $48.7 billion acquisition of fellow consumer health group Kenvue (KVUE).
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Kenvue shareholders were in contrast feeling much perkier with the stock soaring over 20% in pre-market trading.
Iconic Brands
Kimberly-Clark, whose brands include Huggies diapers and Kleenex tissues, said it was paying $21.01 a share based on Kenvue’s closing price of $14.37 last Friday.
Kimberly-Clark said the deal would bring together two iconic American companies to create “a combined portfolio of complementary products, including 10 billion-dollar brands, that touch nearly half the global population through every stage of life.” It is expected to have annual revenues of approximately $32 billion.
What is likely keeping the lid on Kimberly-Clark investors’ enthusiasm is Kenvue’s ownership of pain-relief medication Tylenol – known as paracetamol in some countries outside of the U.S.
Last week Texas Attorney General Ken Paxton filed a lawsuit against Kenvue over allegations that Tylenol is tied to autism. The Texas AG’s lawsuit claims that Johnson & Johnson (JNJ), which owned Tylenol before its spinoff of Kenvue, “willfully ignored and attempted to silence the science” that links Tylenol to autism.
Tylenol Ties
The U.S. government also updated healthcare guidance for pregnant women last month to avoid taking Tylenol due to its potential ties to autism. While some studies have found a connection between women taking Tylenol while pregnant and their children developing autism, other studies have come to different conclusions. Kenvue is also facing legal woes related to talcum powder products in the UK.
It has been enough to batter the Kenvue stock in recent weeks – see below:
Kimberly-Clark hopes however that the deal, which is expected to close in the second half of next year, will leave it more exposed to the growth in demand for health and wellness products around the globe.
Kimberly-Clark shareholders will own approximately 54% of the combined company, with current Kenvue shareholders owning the remaining 46%.
Mike Hsu, Kimberly-Clark Chairman and Chief Executive Officer said: “Kenvue is uniquely positioned at the intersection of CPG and healthcare, with exceptional talent and a differentiated brand offering serving attractive consumer health categories.”
Is KMB a Good Stock to Buy Now?
On TipRanks, KMB has a Hold consensus based on 3 Buy, 8 Hold and 1 Sell ratings. Its highest price target is $162. KMB stock’s consensus price target is $126.83, implying a 5.95% upside.
