shares of Johnson&Johnson‘s consumer health spinoff kenvue Soared 20% in afternoon trade Thursday after making its market debut on the New York Stock Exchange, making it the largest U.S. IPO in more than a year.
The new company opened at $25.53 per share after initially valuing its IPO at $22 on Wednesday night, at the high end of its target range.
At the opening price, Kenvue had an implied valuation of nearly $48 billion.
Kenvue sold 172.8 million shares in the offering, raising $3.8 billion and valuing the company at approximately $41 billion. Originally, the company planned to sell 151 million shares.
The company, which goes by the ticker KVUE, has a wealth of well-known consumer brands such as Band-Aid, Tylenol, Listerine, Neutrogena, Aveeno and J&J’s eponymous baby powder.
“Millions of consumers around the world are waking up this morning to a Kenvue product in their home,” CEO Thibaut Mongon told CNBC’s Squawk on the Street Thursday morning ahead of the stock’s debut.
Mongon was previously Executive Vice President and Global Chair of Consumer Health at J&J. He will sit on Kenvue’s board of directors.
Thibaut Mongon, CEO of Kenvue Inc., a Johnson & Johnson consumer health business, rings the opening bell to celebrate its initial public offering on the New York Stock Exchange (NYSE) in New York City, the United States, May 4, 2023.
Brendan Mcdermid | Reuters
Kenvue’s IPO marks the largest restructuring move in J&J’s 135-year history.
J&J first announced the spin-off in November 2021 to streamline operations and refocus on its faster-growing medical device and pharmaceutical businesses.
But the company will generally be able to control the direction of Kenvue’s business and matters shareholders vote on for now: The healthcare giant will own 1.7 billion common shares of Kenvue after the IPO closes, representing a stake of 90 percent .9% corresponds. J&J will reduce the remainder of its stake in Kenvue later this year.
Mongon told CNBC that J&J has been “very clear” about its intention to part ways with Kenvue this calendar year.
Kenvue expects to pay a quarterly cash dividend of approximately 20 cents per share beginning in the third quarter ended Oct. 1. Mongon called it an “attractive dividend policy that allows us to return more value to shareholders.”
Thibaut Mongon, CEO and Paul Ruh CFO of Kenvue Inc., a Johnson & Johnson consumer health company, pose together during the company’s initial public offering on the New York Stock Exchange (NYSE) in New York City, the United States, April 4, 2017. May 2023.
Brendan McDermid | Reuters
Meanwhile, the consumer-focused Kenvue is already profitable. The spin-off reported 2022 revenue of $14.95 billion and net income of $1.46 billion on a pro forma basis, according to a preliminary prospectus filed with the Securities and Exchange Commission last week.
“We are doing this from a position of strength. Kenvue is a healthy business,” Mongon told CNBC.
For the first quarter ended April 2, Kenvue estimates revenue of $3.85 billion and net income of approximately $330 million. These results are preliminary.
According to the filing, the company expects annual revenue growth of about 3% to 4% globally through 2025.
The IPO still leaves J&J liable for thousands of allegations that its talc baby powder and other talc products caused cancer. Those products fall under the company’s consumer health business, now Kenvue, but the spinoff will only take on talc-related liabilities arising outside of the U.S. and Canada, according to its January IPO filing.
When asked about the liabilities, Mongon said Kenvue is “laser focused on what we do best: serving our customers and also our portfolio with the brands we mention.”
The debut raises hopes that the subdued US IPO market may be recovering after last year’s slump.
Kenvue’s IPO raised more than any other offering this year, according to a report by Renaissance Capital. The 40 IPOs in 2023 have collectively raised just $2.4 billion.
The spinoff is also the largest IPO since electric vehicle maker Rivian went public in November 2021.