J&J To Be Divided Into Two Listed Companies

The consumer goods division of Johnson & Johnson, a health-care multinational, will be separated from its pharmaceutical and medical device businesses, the company announced on Friday, which will establish two publicly listed firms.

The stocks of the company were driven up by the news in premarket trade.

The business will separate its home household products division, which manufactures Band-Aid bandages, Aveeno and Neutrogena skin care products, and Listerine, from the more risky, but faster-growing prescription pharmaceuticals and medical device division, which includes the Covid-19 vaccine of the company.

“Following a comprehensive review, the board and management team believe that the planned separation of the consumer health business is the best way to accelerate our efforts to serve patients, consumers, and healthcare professionals, create opportunities for our talented global team, drive profitable growth, and – most importantly – improve healthcare outcomes for people around the world,” outgoing CEO Alex Gorsky said in a statement.

The separation of the businesses is expected to be completed in 18 to 24 months, according to the company.

The name Johnson & Johnson would be retained by the pharmaceutical and medical device sector, which incorporates innovative technologies such as robots and artificial intelligence, and will be led by Joaquin Duato, J&J’s new CEO.

The company has not yet decided on a name for the new publicly traded consumer business, according to Gorsky.

He said the board of directors had debated the idea to split up the firm for “some time” since it would provide “tremendous opportunities” to stakeholders.

“It’s in the best long-term interest of all our stakeholders,” he said on “Squawk Box.” “Our goal is really to create two global leaders – a pharmaceutical and medical device business that has great potential today … and of course, the consumer business that’s got iconic brands.”

As previously announced, Duato will take over the post in January. According to the corporation, these separate business units are anticipated to make around $77 billion in sales this year, while the consumer products division is slated to sell nearly $15 billion in merchandise.

Legal cases resulting from accusations that Johnson’s Baby Powder causes cancer, which the corporation has categorically disputed, will also by be acquired by the company’s consumer products entity, which is yet to be named.  

The consumer segment alone boasts four brands that make over $1 billion in yearly sales, according to Gorsky,

He said that the separation of the company will potentially provide “even more agility” and “a better opportunity for capital allocation”.

With Gorsky’s resignation as CEO, J&J was already in the midst of a major reorganization. According to the company, he will continue to serve as executive chairman of the new J&J.

In addition, following the modification its overall dividend will remain “at least at the same level”, the firm added.

J&J’s dividend yield is now about 2.6 percent.

The news comes just a few days since its intentions to split the company into three publicly listed entities was made by GE, which would see the company spin off its medical and energy divisions from its aviation division.

(Adapted from KHN.org)

Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability, Uncategorized

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