Recently, Kenvue (KVUE. US) announced on its official website that Johnson&Johnson (JNJ. US) will sell its remaining 9.5% stake in the company to Goldman Sachs and JPMorgan Chase in a debt to equity swap. Based on a price of $20 per share, the estimated transaction value is approximately $3.647 billion (approximately RMB 26.3 billion), and the transaction is scheduled to be completed on May 17th.
With a revenue of 41.4 billion yuan from Kenvue's cosmetics related business, Johnson&Johnson ranked among the top ten global beauty groups in 2023. However, when Johnson&Johnson decides to sell all of its remaining shares in Kenvue, it means it will completely leave the cosmetics industry.
Taken from Kenvue's official website
Johnson&Johnson bid farewell to its beauty business
In November 2021, Johnson&Johnson announced the split of its consumer goods health business and named it Kenvue. In May 2023, Kenvue was officially listed on the New York Stock Exchange. At that time, Johnson&Johnson held 89.6% of the shares in Kenvue, leading its development.
According to Kenvue's official website, its brands have multiple well-known consumer health brands, such as Bondi Band Aids, Tylenol Pharmaceuticals, and Lee&Sterling Mouthwash, all of which are large brands worth $1 billion.
There are also 20 brands worth over $150 million, covering multiple categories such as cosmetics, baby care, body care, hair care, oral care, and women's health. Among them, Dabao, Biafine, Clean& Clear, Ludeqing, Doctor Chengye, Johnson&Johnson, and others are well-known brands among Chinese consumers, with a total annual business scale of nearly 15 billion US dollars.
Thanks to the strong support of these well-known brands, Kenvue's massive IPO of nearly 300 billion yuan became one of the largest IPOs in the US stock market in 2023, with its market value soaring to over 50 billion US dollars.
Kenvue has revealed that after going public, Johnson&Johnson originally held at least 80.1% of the company's voting shares. But in August last year, Johnson&Johnson significantly reduced its stake in Kenvue, retaining only 9.5%.
In fact, from the perspective of performance, with the clarification of business priorities and the reconfiguration of resources, Kenvue is gradually stabilizing its development and finding its own growth path after separating from Johnson&Johnson.
The first annual report data after listing shows that in 2023, it achieved net sales of approximately RMB 111.46 billion, a year-on-year increase of 3.3%, which is its best performance in the past five years.
Undoubtedly, this transformation process is not without challenges.
Since the beginning of this year, Kenvue has reported multiple layoffs. According to the latest Bloomberg report on May 7th, Kenvue plans to lay off approximately 4% of its workforce globally, which will affect nearly 920 employees, mainly due to the imminent termination of its Transition Service Agreement (TSA) with Johnson&Johnson.
As part of the company's cost reduction measures, Kenvue expects to achieve an annual pre tax cost savings of $350 million by 2026, which will be used for further reinvestment and other purposes.
This series of layoffs also reflects that as Kenvue becomes an independent entity, the boundary between Johnson&Johnson and Kenvue is becoming increasingly clear.
Currently, Johnson&Johnson plans to convert its remaining shares in Kenvue to Goldman Sachs and JPMorgan Chase Securities in order to repay its debts, marking a complete exit of Johnson&Johnson from its century old consumer health business. In the future, the two companies are expected to become completely independent operating entities, and there will be no more "backers" in the future.
It is worth mentioning that Kenvue CEO Thibaut Mongon emphasized in the first quarter conference call that "in the first quarter of this year, Kequ é's business in China achieved double-digit growth, and Kequ é has sufficient opportunities to achieve growth in this market. We are committed to the long-term prospects of the Chinese market, and this view has not changed.".
In other words, although Kenvue has completely unbound itself from Johnson&Johnson, it is still committed to long-term involvement in the Chinese market.
Strong growth in pharmaceutical business
Johnson&Johnson will fully withdraw from Kenvue's consumer health business and focus deeply on the pharmaceutical and medical device business sectors.
Joaquin Duato, Chairman and CEO of Johnson&Johnson, previously stated that the spin off of its consumer health business is aimed at further strengthening Johnson&Johnson's focus on the transformation and innovation of its pharmaceutical and medical technology businesses.
In 2023, Johnson&Johnson's revenue was $85.2 billion, a year-on-year increase of 6.5%. Among them, pharmaceutical revenue was 54.759 billion US dollars, a year-on-year increase of 4%; Medical device revenue reached 30.4 billion US dollars, a year-on-year increase of 10.8%. According to Fiercepharma, Johnson&Johnson is the world's highest revenue healthcare company.
Johnson&Johnson disclosed in its financial report that the development of innovative medicine and medical technology industries is showing a good momentum. After successfully splitting its consumer goods and health business, Johnson&Johnson's performance has grown, which to some extent reflects the company's continued deepening in the medical field.
From the financial report data of the past four years, revenue in 2020 and 2021 increased by 0.64% year-on-year and decreased by 4.65%; After the split, the year-on-year increase in 2022 was 1.59%; In 2023, the year-on-year increase was 6.46%, reaching 85.159 billion US dollars (approximately RMB 614.669 billion).
In addition, Johnson&Johnson has strengthened its position in the medical device and pharmaceutical sectors through a series of merger and acquisition strategies, especially in the cardiovascular field where investments have shown effectiveness.
In the field of medical devices, Johnson&Johnson has made large-scale investments in recent years, including the acquisition of Abiomed, a leader in the field of artificial hearts, Laminar, a left atrial appendage closure device company, and Shockwave, a coronary endovascular lithotripsy (IVL) company. These mergers and acquisitions have helped Johnson&Johnson achieve significant growth in the medical device sector, with the possibility of reaching the top position in the global medical device industry in 2024.
In terms of pharmaceuticals, Johnson&Johnson's oncology business grew by 10.5% in 2023, reaching $17.66 billion. In addition, Johnson&Johnson expects more than 20 new drugs to be launched and more than 50 indications to expand by 2030. The main driving force for future growth will be 10 or more innovative drugs with peak sales potential of $5 billion or more.
Johnson&Johnson's development in China is also worth paying attention to. As one of the earliest multinational companies to enter the Chinese market, Johnson&Johnson's business in China covers various fields and has established research and development centers.
China is the only market outside the United States where Johnson&Johnson has established research and development centers or departments in all major businesses. Johnson&Johnson is also the first Fortune Global 500 company to strategically deploy its innovative position in the Chinese market.
Joaquin Duato has stated that Johnson&Johnson's acquisition strategy has not changed, and mergers and acquisitions will remain a top priority. "When we consider mergers and acquisitions, we will consider the next few decades and not think in an opportunistic way."
It can be seen that in the process of transitioning to the "new Johnson&Johnson", Johnson&Johnson's bold self innovation is not only limited to bidding farewell to the beauty business.