Johnson & Johnson (J&J) on Friday announced it will be splitting into two companies in 2022, with J&J focusing on its pharmaceutical and medical device interests, and the new company continuing to sell J&J's consumer health care brands.
According to J&J CEO Alex Gorsky, the company plans to separate from its consumer division within 18 to 24 months.
It is yet to be determined what the separation will look like, what the new consumer health care company will be called, and who will lead the company, Gorsky added, but the split will create two publicly traded companies. The pharmaceutical and medical device division will retain the J&J name and Joaquin Duato will still take over the role of CEO in January, CNBC reports.
Gorsky said the decision had been discussed by J&J's board for "some time" and was a result of the businesses, customers, and markets diverging in recent years, but the pandemic accelerated this divergent potential, the Wall Street Journal reports.
"The best path forward to ensure sustainable growth over the long term and better meet patient and consumer demands is to have our consumer business operate as a separate health care company," Gorsky said.
According to Gorsky, separating the consumer division from the rest of J&J will provide the company with "even more agility" and "a better opportunity for capital allocation."
"Our goal is really to create two global leaders—a pharmaceutical and medical device business that has great potential today … and of course, the consumer business that's got iconic brands," Gorsky added.
The new consumer health company will continue to sell J&J's branded products like Band-Aid, Tylenol, and Johnson's Baby Powder.
"For the new [J&J], this planned separation underscores our focus on delivering industry-leading biopharmaceutical and medical device innovation and technology with the goal of bringing new solutions to market for patients and health care systems, while creating sustainable value for shareholders," Gorsky said.
Meanwhile, J&J believes the new consumer health company will "be a global leader across attractive and growing consumer health categories, and a streamlined and targeted corporate structure would provide it with the agility and flexibility to grow its iconic portfolio of brands and innovate new products," Gorsky added.
J&J's announcement follows similar decisions made by Pfizer and GlaxoSmithKline, which also previously announced they would shed their consumer businesses to focus on pharmaceuticals.
Jeff Jonas, asset manager at GAMCO Investors, said J&J creating a spin-off company will allow the company to increase revenues. "Ultimately, when they do finish the consumer spin-off, they'll probably raise a little bit of cash and put a little bit of debt on the consumer business, which would give them more money to do deals," Jonas said. (Knutson, Axios, 11/12; Rockoff/Loftus, Wall Street Journal, 11/12; Mishra/Erman, Reuters, 11/12; Pound/Kopecki, CNBC, 11/12)
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