A Multi-Billion Budding Venture in Consumer Health, J&J’s Kenvue Aims to Raise $3.5 Billion in IPO

Johnson & Johnson (J&J) launched a roadshow for an initial public offering (IPO) of its new consumer healthcare business, Kenvue earlier this week to attract interest from investors. The soon-to-be spinoff of J&J has started meeting prospective investors and expressed its intention to raise $3.5 billion or more in the offering.

J&J has valued Kenvue at up to nearly $43 billion and set the share price in a $20 to $23 range for the IPO to be completed later this year. If successful, this transaction could be the world’s largest healthcare IPO since German medical technology business Siemens Healthineers went public in March 2018, potentially injecting new impetus and optimism into the subdued IPO market.

Related article: Soon-To-Be J&J Spinoff, Kenvue Files for $100 Million IPO

An Anticipated New Consumer Health Company

J&J’s consumer healthcare unit reported net revenue of $15 billion in 2022. During the first quarter of 2023, the business generated $3.8 billion in sales. Back in November 2021, J&J announced its plan to separate this sector and create a new publicly traded company, which was officially named Kenvue in September 2022

The separation is expected to reach completion by mid-to-late 2023. With the vision “Realize the extraordinary power of everyday care” and a differentiated portfolio covering essential health, self-care, skincare and cosmetic products, the new company will be responsible for J&J’s renowned household care brands such as Band-Aid, Listerine, Neutrogena and Zyrtec.

Key Details of Kenvue’s IPO

In January, Kenvue filed a preliminary prospectus with the Securities and Exchange Commission (SEC) for a $100 million IPO, having Goldman Sachs, JPMorgan Chase and Bank of America as the leading underwriters. Yet at that time, some experts in investment banking predicted that the company could raise as much as $5 billion upon completion. 

According to J&J’s press release earlier this week, the healthcare conglomerate has launched a roadshow for the IPO of more than 151 million shares of common stock priced between $20 and $23 per share, aiming to raise up to $3.5 billion based on the top end of the proposed range of the listing. Also, Kenvue has applied to list its common stock on the New York Stock Exchange under the symbol “KVUE.”

As J&J is still facing more than 40,000 lawsuits in the U.S. concerning its allegedly carcinogenic talc-based baby powder and struggling to resolve the issue with a recent $8.9 billion settlement proposal, it is noteworthy that Kenvue will assume talc-related liabilities that arise outside the U.S. and Canada, according to the IPO filing.

A Huge Revival of the Quiet IPO Market?

2020 and 2021 saw a booming market in healthcare and life sciences (particularly biotech) IPOs. However, the IPO slate for 2022 became relatively quiet since the market environment was unwelcoming due to various factors such as aggressive interest rate hikes and entrenched inflation, resulting in greater restrictions in accessing public capital for companies.

Regarding the number of cases, the health and life sciences sector had 168 IPOs globally in 2022, showing a marked decrease compared to 391 cases in 2021. In terms of IPO proceeds (funds raised in an IPO), the volume dropped from $67.2 billion in 2021 to $17.5 billion in 2022. 

If successful, Kenvue’s IPO could be the largest one in the healthcare sector over the past 5 years since Germany-based Siemens Healthineers went public in March 2018. Experts in the IPO market stated that the deal could be an important deal in restarting the subdued market, with great expectation that a positive reception for Kenvue would encourage other companies to move forward with their listings. 

There are a total of 22 health and life sciences IPOs globally in 2023 year to date with IPO proceeds of $1.2 billion. Given the fact that the Federal Reserve dials down the size of its rate hikes and a number of biotech companies fall short of their fundraising targets in private investment rounds to cover their high costs in R&D and clinical trials, there are predictions that more biotech and pharma companies will tap the IPO market later this year. 

Author

Richard Chau