J&J consumer-health IPO process to kick off key test for moribund new-issue market

Johnson & Johnson is poised to begin a roadshow to pitch shares of its consumer-healthcare business, the producer of household names such as Tylenol, in a test for an IPO market that has been in the doldrums for the past year.

Kenvue Inc. plans to start meeting with prospective investors as early as Monday, people familiar with the matter said. The goal is to raise $3.5 billion or more in the offering at a valuation close to $40 billion, the people said. IPO roadshows typically last anywhere from a few days to a week ahead of the stock’s trading debut.

Assuming the company and its advisers manage to pull off the listing, Kenvue’s stock would trade on the New York Stock Exchange under the ticker KVUE.

J&J’s consumer business makes well-known over-the-counter medicines including Tylenol; Band-Aids and other wound-care products; baby-care products such as Johnson’s Baby Shampoo; and skin-care offerings such as Aveeno and Neutrogena. The division slated to become Kenvue generated $14.95 billion in global sales last year, about 15.7% of J&J’s total. The healthcare company generated the rest of its revenue from its larger pharmaceutical and medical-device units, which will remain part of J&J after the Kenvue separation.

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The share sale would be by far the biggest of what so far has been a quiet year for IPOs.

Ticker	Security	Last	Change	Change %
JNJ	JOHNSON & JOHNSON	154.81	-0.27	-0.17%

Traditional IPOs in the U.S. have raised just $2.3 billion in 2023 through Friday, according to Dealogic, in the worst start to a year since 2009. Last year, companies listing shares in the U.S. raised less money than in any other year in at least two decades as investors, facing an increase in inflation and rising interest rates, shunned shares of high-growth companies.

Many companies are steering clear of listing stock because of the volatile stock market and economic uncertainty. Some executives of private companies say they are having a hard time forecasting future revenue, which makes it difficult to pitch shares to public investors. Marquee names such as British chip designer Arm Ltd. and grocery-delivery company Instacart Inc. are preparing IPOs for later this year, and successful stock sales by companies such as Kenvue could embolden them to move forward with their plans, some advisers say.

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A rare bright spot in the IPO market has been corporate carve-outs, companies spun off from parents using a standard IPO framework. Investors tend to look at these types of offerings more favorably in difficult markets as they are typically mature businesses with solid profits. Kenvue generated $2.1 billion of net profit in 2022.

Ticker	Security	Last	Change	Change %
INTC	INTEL CORP.	23.93	-0.12	-0.50%
MBLY	MOBILEYE GLOBAL INC	17.39	-0.66	-3.66%

One of the biggest IPOs in the U.S. last year was Intel Corp.’s carve-out of its self-driving car unit, Mobileye Global Inc., in October. As of Friday, more than 85% of companies that went public via traditional IPOs in 2021 or 2022 trade below their offer prices, according to Dealogic. Mobileye’s stock, meanwhile, has more than doubled from its $21 offer price.

J&J unveiled its plan to separate the consumer unit in 2021, saying it had grown apart from the pharmaceutical and medical-device units. The consumer division’s sales growth and profit margins have generally been lower in recent years than those of the other units, which are also more dependent on costly and time-consuming research and development.

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The consumer unit’s revenue growth accelerated in the first quarter to 7.4% as a difficult cold and flu season drove higher sales of Tylenol and other OTC medicines.

Kenvue is expected to have modest sales growth in coming years as it competes with consumer-product giants including Procter & Gamble Co., the consumer-health units of drugmakers including Bayer AG and Sanofi SA, and consumer spinoffs such as Haleon, which was recently carved out of GSK PLC. Kenvue’s annual sales growth is expected to be about 4% this year, 2% in 2024 and 3% in 2025, according to estimates of analysts surveyed by FactSet.

Ticker	Security	Last	Change	Change %
PG	PROCTER & GAMBLE CO.	179.26	-0.10	-0.06%
GSK	GSK PLC	34.13	-0.20	-0.58%

J&J will maintain majority ownership of the business immediately following the IPO, and has said it plans to shed the rest of its stake later in 2023.

Johnson’s Baby Powder is another famous J&J consumer product that will be sold by Kenvue. J&J is in the midst of negotiating a multibillion-dollar resolution of tens of thousands of lawsuits alleging talc-based powder caused cancer in users. J&J says its powder is safe and doesn’t cause cancer. It has switched to cornstarch-based powder from talc in the U.S. and Canada, and is in the process of doing the same globally.

J&J plans to retain the talc-related liabilities for products sold in the U.S. and Canada, while Kenvue will be responsible for any liabilities arising from talc products elsewhere.

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The lead underwriters on the Kenvue IPO are Goldman Sachs Group Inc. and JPMorgan Chase & Co.

Ticker	Security	Last	Change	Change %
GS	THE GOLDMAN SACHS GROUP INC.	601.71	-3.86	-0.64%
JPM	JPMORGAN CHASE & CO.	246.25	-3.47	-1.39%

Laura Cooper contributed to this article.