Kimberly-Clark to Buy Tylenol Maker Kenvue. Why the Stock Market Hates the Deal.

The Trump administration’s barrage of attacks against Tylenol has weighed on shares of Kenvue. (RONALDO SCHEMIDT/AFP via Getty Images)

Key Points

• Kimberly-Clark is acquiring Kenvue for an enterprise value of approximately $48.7 billion, including debt.
• Kenvue’s stock rose 15% after the announcement, while Kimberly-Clark’s shares fell 13%.
• Kenvue’s net sales were $15.44 billion in 2023 and $15.45 billion in 2024, with a 3.5% decrease in third-quarter net sales.

Kimberly-Clark is buying Tylenol maker Kenvue for nearly $50 billion, and Wall Street isn’t too fond of the deal. And for good reason.

The cash-and-stock transaction, announced Monday, values Kenvue at an enterprise value of about $48.7 billion, including debt. Under the terms of the deal, Kenvue shareholders will receive $21.01 a share, based on Kenvue’s closing price of $14.37 on Friday.

Created with Highcharts 9.0.1Source: FactSetAs of Nov. 3, 3 p.m. ET

Created with Highcharts 9.0.1KenvueKimberly-ClarkOct. 27Nov.-15-10-5051015%

At closing, Kimberly-Clark shareholders will own roughly 54% of the combined company, with current Kenvue shareholders owning the remaining 46%, the companies said.

Kimberly-Clark Chairman and CEO Mike Hsu described the deal as a union of “two iconic companies to create a global health and wellness leader.” Kimberly-Clark, the owner of brands including Kleenex and Huggies, “has undertaken a significant transformation to pivot our portfolio to higher-growth, higher-margin businesses,” he added.

The market’s reaction was less enthusiastic. Kenvue stock rose 15% to $16.51 following the announcement, while Kimberly-Clark shares fell 13%.

News of the deal comes as Kenvue grapples with legal troubles that have repeatedly knocked down the stock. The Trump administration’s barrage of attacks against Tylenol has weighed on shares. The stock plunged in September after the White House linked childhood autism to use of the drug during pregnancy.

Last month, a lawsuit was filed in the U.K. alleging Johnson & Johnson , which spun off Kenvue in 2023, knowingly sold baby powder that was contaminated with cancer-causing asbestos. The lawsuit targets both Johnson & Johnson and Kenvue UK Ltd., a subsidiary.

The deal marks Kimberly-Clark’s move into over-the-counter drugs; the company is best known for paper products. CEO Hsu declared the transaction would create the “largest pure play consumer health company.”

In addition to assuming potential litigation risk for the Tylenol brand and talc lawsuits outside the U.S., Kimberly-Clark must reckon with other risk factors, TD Cowen analysts wrote Monday.

The firm noted that Kimberly-Clark is paying a “significant equity premium” to acquire Kenvue. The deal values Kenvue at $19.25 a share. Even with Monday’s gains, the stock was trading at under $17.

And there’s always a chance the deal won’t pan out—the firm anticipates “lengthy regulatory review in multiple geographies.”

While the deal may relieve concerns about Kimberly-Clark’s overexposure to products like tissues and toilet paper, the new breadth comes with risks. Kraft Heinz , Keurig Dr Pepper , and Kellanova have all announced split-ups in the past few years to reverse diversification, analysts said.

And despite Hsu’s assurance that Kimberly-Clark will be able to “help Kenvue improve execution,” Kenvue’s past earnings reports show Kimberly-Clark is buying a business whose growth has stalled.

Kenvue posted net sales of $15.44 billion in 2023, the same year it finalized its separation from Johnson & Johnson. In 2024, the figure was nearly the same, at $15.45 billion. Analysts polled by FactSet are expecting $15.12 billion in sales this year.

In the third quarter, Kenvue noted that net sales fell 3.5% from the same period a year ago, reflecting a 4.4% decrease in organic sales. Coming into Monday, shares have slumped nearly 33% this year.

The company is undergoing a strategic review, which led to the exit of former CEO Thibaut Mongon earlier this year.

Kirk Perry, a company director, was appointed interim CEO in July. The company said at the time it was “considering a broad range of potential alternatives,” including ways to simplify its portfolio and operations.

The company has faced considerable pressure from activist investors such as Starboard Value, which initiated a proxy battle in late 2024, citing Kenvue’s underperformance and deteriorating financial condition. The firm ended its fight in March after securing three board seats.

Kenvue’s deal with Kimberly-Clark is slated to close in the second half of 2026. Before then, shareholders must approve it. If Monday’s stock move is an indicator of sentiment, there’s a chance they won’t.

Write to Joe Woelfel at joseph.woelfel@barrons.com and Mackenzie Tatananni at mackenzie.tatananni@barrons.com