Johnson & Johnson is spinning off its Consumer Health business into a new, publicly traded company, it announced Friday, creating a pair of global leading firms where once there was one.
New Brunswick-based J&J will remain a health care giant, and continue its planned leadership transition from CEO Alex Gorsky to Executive Committee Vice Chairman Joaquin Duato. The company would retain the Pharmaceutical and Medical Device units in its portfolio.
The new, as yet unnamed Consumer Health company would include brands such as Neutrogena, Tylenol, Band-Aid and others. Leadership will be determined and announced as the separation continues.
“Throughout our storied history, Johnson & Johnson has demonstrated that we can deliver results that benefit all our stakeholders, and we must continually be evolving our business to provide value today, tomorrow and in the decades ahead,” Gorsky said. “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 health care professionals, create opportunities for our talented global team, drive profitable growth and — most importantly — improve health care outcomes for people around the world.”
J&J said the goals of the separation would create value for all stakeholders by:
- Increasing management focus, resources and more to address differing industry trends and better meet the needs of the two companies’ patients and consumers;
- Further focusing capital allocation based on the objectives of each separate company;
- Providing each company with a stronger financial profile and providing investors with more targeted investment opportunities; and
- Aligning corporate and operational structures to better drive growth and value creation.
“For the new Johnson & Johnson, this planned separation underscores our focus on delivering industry-leading biopharmaceutical and medical device innovation and technology with the goal of bringing new solutions to market for patients and health care systems, while creating sustainable value for shareholders,” Gorsky said. “We believe that the new Consumer Health company would be a global leader across attractive and growing consumer health categories, and a streamlined and targeted corporate structure would provide it with the agility and flexibility to grow its iconic portfolio of brands and innovate new products. We are committed to the success of each organization, as well as our company’s more than 136,000 employees around the globe, who will remain the backbone of these businesses.”
The company said its Pharmaceutical and Medical Devices segments are expected to generate combined revenue of about $77 billion for the full year 2021. The Consumer Health segment is expected to generate revenue of about $15 billion for the full year, led by four $1 billion megabrands and 20 brands over $150 million.
“This planned transaction would create two businesses that are each financially strong and leaders in their respective industries,” Duato said in a statement. “We believe that the new Johnson & Johnson and the new Consumer Health company would each be able to more effectively allocate resources to deliver for patients and consumers, drive growth and unlock significant value. Importantly, the new Johnson & Johnson and the new Consumer Health company would remain mission-driven companies with exceptional brands, commitments to innovation and remarkable talent. Each company would carry on the Johnson & Johnson legacy of putting the needs and well-being of the people we serve first.”
J&J said it expects the organizational design for the new company to be completed by year-end 2022. The board of directors intends to spin off the company through the capital markets, with a targeted completion in 18 to 24 months, pending customary approvals and conditions.
Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are serving as financial advisers to J&J, while Cravath, Swaine & Moore LLP and Baker & McKenzie LLP are serving as legal counsel.
