Institutional Shareholder Services on Friday recommended that shareholders approve plans by Kleenex maker Kimberly-Clark to buy Tylenol maker Kenvue, saying a tie-up could improve financial metrics.
“On balance, support for the transaction is warranted,” wrote ISS, whose recommendations often guide how large investors vote on hot-button issues like mergers and who serves on boards. Shareholders will vote on January 29.
Kimberly-Clark in early November proposed buying Kenvue for more than $40 billion to create a global consumer health company with brands like Band-Aids and Huggies diapers.
Activist investors, including Toms Capital and Third Point, had been pushing Kenvue to sell itself at the same time the company faced ongoing liability litigation over talcum-containing baby powder and warnings from the White House that the active ingredient in Tylenol could cause autism.
ISS, in its note, acknowledged that a critical question for shareholders will be the “sustained negative market reaction” and uncertainties about the litigation revolving around Kenvue products.
Kimberly-Clark’s share price has dropped roughly 17% since the deal was announced. Kenvue’s share price has tumbled 35% since the former consumer healthcare division of Johnson & Johnson was listed as a public company in 2023.
But ISS noted that a tie-up between Kimberly-Clark and Kenvue would bring positive synergies and benefits for the company’s strategic goals. It also noted that it is positive that no shareholder has publicly criticized the planned deal.
Source: Reuters.com