Kenvue, Inc. (KVUE) Risk Analysis

At the time the First Merger is completed, each issued and outstanding share of our common stock will be converted into the right to receive the Merger Consideration, which consists of 1) 0.14625 shares of K-C common stock and 2) $3.50 in cash. The exchange ratio is fixed and will not be adjusted to reflect stock price changes of either our common stock or K-C common stock prior to the closing of the First Merger. Accordingly, the market value of the stock consideration that our shareholders will receive in the First Merger will vary based on the price of K-C common stock at the time our shareholders receive the Merger Consideration, and our shareholders cannot be sure of the market value of the share component of the Merger Consideration they will receive upon completion of the First Merger. The market price of K-C common stock is expected to fluctuate through and after the consummation of the Proposed Transaction, which may not occur for a considerable amount of time. Changes in the price of K-C common stock may result from a variety of factors, including general market and economic conditions, changes in K-C's and our businesses, operations and prospects, changes in market assessments of the likelihood that the Proposed Transaction will be completed and/or the value that may be generated by the Proposed Transaction, changes with respect to expectations regarding the timing of the Proposed Transaction, and regulatory considerations. Many of these factors are beyond our and K-C's control. In addition, the use of cash and incurrence of indebtedness by K-C in connection with the financing of the Proposed Transaction may have an adverse impact on K-C's liquidity, limit K-C's flexibility in responding to other business opportunities, and increase K-C's vulnerability to adverse economic and industry conditions, each of which could adversely affect the market price of K-C's common stock prior to closing and that of the combined company following closing.

In the Proposed Transaction, each of our shareholders will become a holder of common stock of the combined company which will continue operations as K-C. Upon completion of the Proposed Transaction, our current shareholders are expected to own approximately 46% and current K-C shareholders are expected to own approximately 54% of the combined company on a fully diluted basis. As a result, our shareholders will have less voting influence on the combined company and may have less influence on its management and policies than they now have over us.

We depend on the experience and industry knowledge of our management personnel and other key employees to execute our business plans. The success of the combined company after the Proposed Transaction will depend, in part, on its ability to retain or attract key management personnel and other key employees. During the pendency or following the consummation of the Proposed Transaction, our current and prospective employees may experience uncertainty or have concerns regarding their roles within the combined company, the timing and consummation of the Proposed Transaction, or the operations of the combined company, any of which may have an adverse effect on our ability to retain or attract key management and other key personnel. If we are unable to retain personnel, including our key management, who are critical to the future operations of the combined company, we or the combined company could face disruptions in our operations, loss of existing customers, loss of key information, expertise, or know-how, and unanticipated additional recruitment and training costs. In addition, the loss of key personnel could diminish the anticipated benefits of the Proposed Transaction. No assurance can be given that the combined company, following the Proposed Transaction, will be able to retain or attract our key management personnel and other key employees to the same extent that we have previously been able to retain or attract our own employees.

The Merger Agreement is subject to a number of conditions that must be fulfilled to complete the Proposed Transaction. Those conditions include, among others, certain regulatory approvals, the absence of government restraints or prohibitions preventing the completion of the Proposed Transaction, the approval of the stock portion of the Merger Consideration (as defined in Note 1, "Description of the Company and Summary of Significant Accounting Policies-Proposed Transaction with Kimberly-Clark," to the Consolidated Financial Statements included herein) for listing on Nasdaq, the continued accuracy of the representations and warranties by both parties, and the performance in all material respects by both parties of their obligations under the Merger Agreement. A number of the conditions are not within our control and may prevent, delay, or otherwise materially adversely affect the consummation of the Proposed Transaction. We cannot predict with certainty whether and when any of the required closing conditions will be satisfied or if another uncertainty may arise and cannot assure you that we will be able to timely consummate the Proposed Transaction as currently contemplated under the Merger Agreement or at all. Our business, results of operations, financial condition, or stock price could be adversely affected, potentially in a material way, by the failure to complete the Proposed Transaction or by a delay in the completion of the Proposed Transaction, including as a result of the following: - the combined company may not realize any or all of the potential benefits of the Proposed Transaction, including any synergies that could result from combining our financial and business resources with those of K-C;- matters relating to the Proposed Transaction will require substantial commitments of time and resources by our management which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to us as an independent company;- we have incurred and will incur further substantial expenses in connection with the Proposed Transaction, including legal, financial advisory, accounting, consulting and other advisory fees, severance/employee benefit-related costs, public company filing fees and other regulatory fees, and other costs relating to the Proposed Transaction regardless of whether the Proposed Transaction is consummated;- we may be subject to legal proceedings related to the potential delay of, or failure to consummate, the Proposed Transaction;- we may experience disruptions to our business resulting from the announcement and pendency of the Proposed Transaction, including adverse changes in our relationships with, or loss of, our customers, business partners, and employees, which may not be reversible and may continue or even intensify in the event the Proposed Transaction is delayed or not consummated;- under the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the Proposed Transaction, which restrictions could adversely affect our ability to conduct our business as we otherwise would have done if we were not subject to these restrictions;- we may experience negative reactions to the Proposed Transaction from the financial markets, including negative impacts on the market price of our common stock; and - if the Proposed Transaction is not consummated, we may suffer from negative publicity and a negative impression of us in the investment community, and a failure to close the Proposed Transaction may have a negative impact on the market price of our common stock.

The success of the Proposed Transaction will depend, in part, on K-C's ability to realize the anticipated benefits and cost savings from combining our and K-C's respective businesses, including operational and other synergies that we believe the combined company will be able to achieve. The anticipated benefits and cost savings of the Proposed Transaction may not be realized fully or at all, may take longer to realize than expected, or could have other adverse effects that we do not currently foresee. Risks associated with the combined company following the Proposed Transaction include: - the integration process will require significant time and focus from management following the Proposed Transaction and may, for the combined company, result in the loss of key employees, the disruption of ongoing businesses, or inconsistencies in standards, controls, procedures, and policies;- key employees might decide not to remain with the combined company after the Proposed Transaction is completed, and the loss of key personnel could adversely affect the combined company's results of operations, financial condition, and growth prospects;- the results of operations of the combined company and the market price of the combined company's common stock after the completion of the Proposed Transaction may be affected by factors different from those currently affecting each of our and K-C's independent results of operations;- there could be potential unknown liabilities and unforeseen expenses associated with the Proposed Transaction that were not discovered in the course of performing due diligence; and - the issuance of shares of the K-C common stock in the Proposed Transaction could depress the market price for the combined company's common stock. In addition, in connection with the Proposed Transaction, K-C is expected to incur significant additional indebtedness to finance the Cash Consideration (as defined in Note 1, "Description of the Company and Summary of Significant Accounting Policies-Proposed Transaction with Kimberly-Clark" to the Consolidated Financial Statements included herein) and pay fees and expenses relating to the Proposed Transaction. This increased indebtedness will reduce the amount of cash flow available to service K-C's debt, including any of our debt assumed by K-C in connection with the Proposed Transaction, in future periods. If the combined company's cash flows and capital resources are insufficient to fund debt service obligations, it could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital, or restructure or refinance its indebtedness.

The Merger Agreement contains "no shop" covenants that restrict our ability to, directly or indirectly, among other things, solicit proposals relating to any alternative business combination or acquisition transactions and enter into any discussions concerning, or provide confidential information in connection with, any such alternative business combination or acquisition transactions. These provisions prevent us from engaging with a potential third-party acquirer that might have an interest in acquiring all or a significant part of the Company.

Following the Proposed Transaction, some of our or K-C's customers, distributors, service providers, suppliers, vendors, joint venture participants, and other business counterparties may terminate or scale back their current or prospective business relationships with the combined company. In addition, we and K-C have contracts with customers, distributors, service providers, suppliers, vendors, joint venture participants, and other business counterparties that may require us or K-C to obtain consents from these other parties in connection with the Proposed Transaction, which may not be obtained on favorable terms or at all. If relationships with customers, distributors, service providers, suppliers, vendors, joint venture participants, or other business counterparties are adversely affected by the Proposed Transaction, or if the combined company loses the benefits of our or K-C's contracts, it could adversely affect our or the combined company's business, results of operations, or financial condition.

The Merger Agreement restricts us from entering into certain corporate transactions and from taking other specified actions without the consent of K-C until the closing of the Proposed Transaction. These restrictions could be in place for an extended period of time if the closing of the Proposed Transaction is delayed and could prevent us from pursuing attractive business opportunities that may arise prior to the closing of the Proposed Transaction.

We and K-C have operated and, until the consummation of the Proposed Transaction, will continue to operate independently. Following the closing of the Proposed Transaction, our respective businesses may not be integrated successfully. It is possible that the integration process could result in the loss of key Company employees or key K-C employees, the loss of customers, service providers, vendors or other business counterparties, the disruption of either company's or both companies' ongoing businesses, inconsistencies in standards, controls, procedures and policies, potential unknown liabilities and unforeseen expenses, delays, or regulatory conditions associated with and following the closing of the mergers or higher-than-expected integration costs, and an overall post-closing integration process that takes longer than originally anticipated. Specifically, the following challenges, among others, must be addressed in integrating our and K-C's operations in order to realize the anticipated benefits of the Proposed Transaction: - combining the companies' operations and corporate functions and the resulting difficulties associated with managing a larger, more complex, diversified business and a larger portfolio of products;- combining our and K-C's businesses in a manner that permits the combined company to achieve the cost savings and operating synergies anticipated to result from the Proposed Transaction;- integrating and managing new product lines;- avoiding delays in connection with the Proposed Transaction or the integration process;- integrating personnel from the two companies and minimizing the loss of key employees;- identifying and eliminating redundant functions and assets;- harmonizing the companies' operating practices, employee development and compensation programs, internal controls, compliance and other policies, procedures, and processes;- maintaining existing agreements with customers, service providers, vendors, and other business counterparties and avoiding delays in entering into new agreements with prospective customers, service providers, vendors, and other business counterparties;- addressing possible differences in business backgrounds, corporate cultures, and management philosophies; and - consolidating the companies' operating, administrative, and information technology infrastructure and financial systems.