Project Description

Johnson and Johnson Consumer Spin-off Notes

March 10, 2022 Update

  • Good overview of the situation.

January 27, 2022 Update

Good article on some of the reasons for the spin and how covid affected the consumer business

  • The continued supply chain issues associated with coronavirus have negatively affected the consumer healthcare (SpinCo) business of Johnson & Johnson (JNJ)
  • Last year JNJ reported average topline revenue growth of 10.4%
    • Medical Device revenue grew by 16.8%
    • Pharmaceutical revenue grew by 13.6%
    • Consumer Healthcare (SpinCo) revenue grew by 3.8%
  • The poor growth by Consumer Healthcare (SpinCo) has a lot to do with “extreme supply constraints” specifically for Skin Care/Beauty products
  • JNJ expects to grow sales by ~6.2% by mid-year 2022

November 12, 2021 Update

On November 12, 2021, Johnson & Johnson (JNJ) announced that is will spin-off its consumer business ($15BN of revenue) within 18-24 months. The new consumer company will be named at a later date. The remaining company will consist of the pharma and med tech business (~$77BN of revenue). The thesis is that the consumer business will trade closer to a consumer multiple (P&G trades at an EV/EBITDA multiple of 17.6x while J&J trades at 13x). The transaction looks fairly interesting. LEAPs may be an interesting strategy as well as JNJ has low volatility so its options will likely be attractively priced.