J&J to reduce Kenvue stake by 80% through stock exchange offer

Johnson & Johnson On Monday, it said it plans to cut by at least 80% her share On Kenvue, the consumer health company that spun off as a standalone company earlier this year, through a stock exchange offering.

J&J owns 89.6% of the common shares of Kenvue, which amounts to more than 1.72 billion shares.

The exchange offer, also known as a split, will allow J&J shareholders to swap all or a portion of their shares for Kenvue common stock at a 7% discount. It is expected to be tax deductible, J&J said in a statement.

The company noted that the split is voluntary for investors and is scheduled to close on August 18, which is much earlier than expected.

J&J said it received a waiver denying the stock lock period associated with Kenvue’s initial public offering in May. This lockout agreement required J&J to wait 180 days to sell any of its stock.

“We believe now is the right time to distribute Kenvue shares, and we are confident that the split is the appropriate path forward to create value for our shareholders,” J&J CEO Joaquín Duato said in a statement.

Duato added that the split will increase J&J’s focus on its pharmaceutical and medical technology business — both of which helped the company turn a profit in the second quarter and last week’s adjusted earnings.

J&J shares were up about 2% in early trading Monday, while Kenvue shares were up slightly.

J&J first announced its intention to launch a swap offering in its second-quarter earnings report Thursday, but the company provided few details on the plan. Kenvue shares tumbled after that announcement, despite second-quarter results that also beat Wall Street estimates.

When asked about J&J’s planned swap offering Thursday, Kenvue CEO Thibaut Mongon told CNBC’s “Squawk on the Street” that the company is “pleased with the way the IPO has been received by shareholders.”

“We see a great deal of alignment among our new investors in seeing Kenvue’s potential, but I can tell you we’re absolutely ready to leave as a completely independent company,” he said.