November 15, 2021: -Health-care conglomerate Johnson & Johnson announced plans to split its consumer products business from its pharmaceutical and medical device operations, which created two publicly traded companies. The news sent shares higher in premarket trading.
The separation will sheer off its household products unit, maker of Aveeno and Neutrogena skincare products and Listerine, from its riskier but faster-growing division that makes and sells prescription drugs and medical devices, which include its Covid-19 vaccine.
“Throughout our storied history, Johnson & Johnson has demonstrated that we were delivering results that benefit all our stakeholders, and we must continually be evolving our business to provide value today, tomorrow, and in the decades ahead,” outgoing CEO Alex Gorsky said.
The company said it hopes to complete the transaction in 18 to 24 months. The pharmaceutical and medical device division, including advanced technologies such as robotics and AI, would retain the name Johnson & Johnson and have J&J’s incoming CEO Joaquin Duato at its helm. Duato is which takes the role in January as planned. Those segments are expected to generate $77 billion in revenue, while the consumer products division is forecast to sell nearly $15 billion in products this year, the company said.
Its new consumer products company will inherit litigation stemming from lawsuits over claims that Johnson’s Baby Powder causes cancer, allegations the company has vehemently denied.
Shares of J&J were up over 3% in premarket trading after the announcement.
J&J was undergoing a significant transition with Gorsky’s departure as CEO, and he remains on as executive chairman of the new J&J, the company said.
In admissions, the company said it planned to keep its total dividend “at least at the same level” following the change. J&J sports a dividend yield of about 2.6%.
This week, the announcement is the second time a major U.S. company has announced a plan to split itself, which follows General Electric.
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