Kimberly-Clark to Acquire Kenvue for $40 Billion
Amid Tylenol Controversy
The owner of Kleenex and Huggies will acquire
the company that has fought unproven claims by the Trump administration that a common
pain reliever is linked to autism.
Deal Overview: Kimberly-Clark,
the maker of Kleenex and Huggies, has agreed to acquire Kenvue
— the Johnson & Johnson spinoff that owns Tylenol, Band-Aid, and Neutrogena
— in a cash-and-stock deal worth $40 billion. Kimberly-Clark shareholders
will hold about 54% of the merged company, which will generate $32 billion
in annual revenue and $7 billion in operating profit.
Market Reaction: Following
the announcement, Kenvue’s shares jumped 15%,
while Kimberly-Clark’s dropped over 10%, reflecting investor caution about
litigation risks and deal financing.
Background and Motivation: Kenvue, spun off by J&J in 2023, has struggled as an independent
entity, facing declining sales and leadership turmoil. Activist investor Starboard
Value pushed for strategic changes earlier this year. Kimberly-Clark pursued the
deal to gain access to Kenvue’s strong consumer brands
and achieve $2 billion in cost synergies over three years.
Tylenol Controversy: The acquisition
comes amid political and legal scrutiny after the Trump administration promoted
unproven claims linking acetaminophen (Tylenol’s active ingredient) to autism.
The controversy and falling stock prices allowed Kimberly-Clark to negotiate favorable terms. Kenvue and scientists
have said evidence of such a link remains inconclusive.
Legal Risks: Kenvue also faces lawsuits tied to J&J’s talc-based
baby powder, though J&J agreed to indemnify Kenvue
in the U.S. and Canada. However, new suits have been filed in the U.K. Kimberly-Clark’s
CEO Mike Hsu said the board vetted the deal with “top scientific, medical, and legal
experts.”
Next Steps: The merger
is expected to close in the second half of 2026, pending shareholder and
regulatory approvals. If either side backs out, a $1 billion breakup fee
applies. The combined company will be headquartered in Irving, Texas, with
Kenvue maintaining a major presence in Summit, New
Jersey.
Kimberly-Clark,
the consumer products giant that owns Kleenex and Huggies, said on Monday that it
agreed to spend about $40 billion to acquire Kenvue, the
embattled maker of Tylenol, which has fought unproven claims by the Trump administration
that link the common pain reliever to autism.
Shares
of Kenvue have plummeted this year as U.S. health officials
have claimed that acetaminophen — the active ingredient in Tylenol — was linked
to autism. In September, President Trump said that pregnant women should “fight
like hell not to take it.”
Kenvue’s stock rebounded strongly after the deal
announcement, rising 15 percent. Kimberly-Clark’s share price fell more than 10
percent, to its lowest level since 2018.
Kenvue was spun off by Johnson & Johnson in
2023 to run the group’s consumer products division. Johnson & Johnson kept the
more profitable, faster-growing businesses in pharmaceuticals and medical devices.
Kenvue has struggled to find its footing as a stand-alone
company, and the activist investment firm Starboard bought a stake in the company
and pushed for change. In March, the chief executive of Starboard, Jeffrey Smith,
took a seat on Kenvue’s board of directors. In July, Kenvue announced the departure of its chief executive alongside
a review of the company’s strategy.
On
Monday (03.11.2025), Kenvue said that it expected sales
to fall by the “low single digits” this year. Last quarter, its “self-care” unit,
which includes Tylenol, recorded the biggest drop in sales of all its divisions.
Talks
with Kimberly-Clark and other prospective suitors began after July’s announcement
of a strategic review, according to three people familiar with the negotiations,
who were not authorized to speak publicly about private deliberations. Kimberly-Clark
had long been interested in Kenvue’s business, given the
prestige of brands like Band-Aid, the overlap in target customers and the potential
to streamline costs, two of the people said.
Acquisition
talks were already underway when the Trump administration in September began linking
Tylenol to autism, the people said. The resulting turmoil, which was reflected in
Kenvue’s share price, helped Kimberly-Clark push for a
deal that valued Kenvue at a discount to its peers. The
deal was also a bet that the market had overreacted to the risk of more scrutiny
from Washington, one of the people said.
Under
the terms of the cash-and-stock deal with Kenvue, Kimberly-Clark
shareholders would own roughly 54 percent of the new company. The combined group
would generate about $32 billion in annual revenue and $7 billion in operating profit,
the companies said. There are nearly $2 billion in “synergies” that could be achieved
by cutting costs, which often means layoffs, in the three years after the companies
combine, they added.
On
Monday, some analysts said that they wanted more clarity on how Kimberly-Clark would
handle potential litigation costs associated with the acquisition.
“The
investment community would like a more fulsome conversation” about Kimberly-Clark’s
legal liabilities resulting from the acquisition, analysts at Barclays wrote in
a note, as well as “the risk/reward involved.”
Generally
speaking, one of the people said, business pressure stemming from scrutiny or litigation
over Tylenol cannot give Kimberly-Clark the ability to walk away from the deal.
Kenvue makes many household name brands, like Band-Aid,
Listerine, Neutrogena and Johnson’s Baby Shampoo. But since the Trump administration
took up the unproven Tylenol-autism link, that product has unexpectedly become the
company’s face.
The
president’s interest in the issue could also give new life to hundreds of lawsuits
in state and federal courts that have been filed in recent years by families claiming
that their children were diagnosed with autism or A.D.H.D. after taking Tylenol
during pregnancy.
And
last week, the Texas attorney general, Ken Paxton, sued Kenvue
and Johnson & Johnson, claiming that the companies hid evidence linking Tylenol
to neurodevelopmental disorders. The suit also claimed, without providing evidence,
that Kenvue was created to shield Johnson & Johnson
from liability over Tylenol. The plan to spin off Kenvue
was announced in 2021, while the Tylenol lawsuits picked up steam in 2022.
Scientists
have long studied a potential connection between acetaminophen and neurodevelopmental
disorders like autism, but research has so far produced mixed results.
Kenvue does not report its revenue from Tylenol,
but the product generates roughly $1 billion in annual sales for the company, according
to an estimate from Morningstar, the financial services firm. Competitors make other
widely used generic acetaminophen products.
Kenvue also sells baby powder products that have
been the source of extensive legal trouble for Johnson & Johnson, which created
a special subsidiary in 2021 to try to bear the brunt of lawsuits it faced.
For
many years, Johnson & Johnson has tried to settle tens of thousands of claims
that talcum previously used in its baby powder caused cancer. The allegations were
that Johnson & Johnson knew its talc products contained carcinogenic fibers, including asbestos, but hid the risks in pursuit of
profits. In March, a federal bankruptcy judge rejected Johnson & Johnson’s latest
multibillion-dollar settlement offer. In recent years, the talc-based baby powder
products were discontinued and replaced by a cornstarch version.
Plaintiffs
in talc cases have named Kenvue in U.S. lawsuits, but
under the terms of the spinoff, Johnson & Johnson agreed to keep those liabilities
and indemnify Kenvue in the United States and Canada.
Last month, in a new legal threat, a group of plaintiffs in Britain, where Kenvue is not shielded, sued Johnson & Johnson and Kenvue over the issue.
In
response to questions from analysts on Monday about pending litigation related to
both talc and Tylenol, Kenvue’s chief executive, Kirk
Perry, said that the company stood “firmly behind the science and the safety of
our products.”
Mike
Hsu, Kimberly-Clark’s chief executive, told analysts that to vet the acquisition
amid the litigation, the company’s board had “multiple sessions” with “the world’s
foremost scientific, medical, regulatory and legal experts.”
“Going
through that process multiple times, I think the work affirmed that this is a generational
value creation opportunity for both companies,” Mr. Hsu said.
Even
after Monday’s jump, Kenvue’s share price, at $16.40,
traded at a discount to the deal price of $21.01, which usually suggests some doubt
among analysts that the merger will be completed at the suggested terms.
The
deal between Kimberly-Clark and Kenvue is expected to
close in the second half of 2026, subject to approvals from shareholders and regulators.
If one of the companies is responsible for the deal’s falling part, it must pay
a breakup fee of roughly $1 billion to the other party, according a regulatory filing.
Mr.
Hsu would become chairman and chief executive of the new company. The combined group
would be based in Kimberly-Clark’s headquarters in Irving, Texas, and “continue
to have a significant presence in Kenvue’s locations.”
Kenvue moved to a new headquarters campus in Summit, N.J.,
this year.