Friday November 12th 2021
Cosmetics and pharmaceuticals
J&J wants to split off daughter with Listerine and Penaten
It is currently a trend in the corporate world – the separation of entire corporate divisions. Johnson & Johnson is now also taking this path. As always in such cases, it is about greater growth and better financial viability.
Make two out of one: The US pharmaceutical company Johnson & Johnson (J&J) is spinning off its business with over-the-counter drugs and other health products. The company with brands ranging from Listerine mouthwash to Penaten baby powder to Band Aid plasters is to be listed on the stock exchange as an independent company in the next one and a half to two years, as J&J announced. So far, the group has a turnover of around 15 billion dollars with 20,000 employees.
What remains is the pharmaceutical business, which is known for its Covid-19 vaccine, but also sells cancer drugs and medical devices, generating around 77 billion dollars. The split is the biggest turning point in the 135-year history of the company, which employs a total of 136,000 people.
“The new Johnson & Johnson and the new consumer goods company can use their funds more effectively for patients and consumers, drive growth and create significant value,” said J&J Chief-Designate Joaquin Duato. The company from New Brunswick in the state of New Jersey is following the example of other pharmaceutical companies:
- GlaxoSmithKline and Pfizer had first merged their consumer goods business, only to separate it next year.
- Darmstadt-based Merck sold its business with over-the-counter medicines such as nasal sprays and vitamin tablets to Procter & Gamble in 2018.
The J&J plans were well received on the stock exchange. According to estimates by the company, the step will initially cost between half a billion and one billion dollars. There is currently a wave of splits and splits around the world:
- General Electric – once the symbol of successful conglomerates – had announced that it would split into three companies.
- The battered Japanese Toshiba followed – under pressure from activist investors – and is also planning a tripartite division.
They follow the economic theory that conglomerates are often valued lower on the stock exchange than their individual parts. With a split, they want to reduce this “conglomerate discount”.
Listed corporations are also splitting up in Germany – for different reasons:
- Siemens brought the medical technology division to the stock exchange as Siemens Healthineers in order to give it the opportunity to make large acquisitions with its own money.
- The power engineering division Siemens Energy was later spun off because, in the transition to renewable energies, it yielded less returns than the other divisions.
- The automotive supplier Continental spun off the drive subsidiary Vitesco, which will have to switch to electromobility in the next few years.
- Daimler separates the truck from the auto business because the two have little in common.