Johnson & Johnson Announces Plans to Split Its Business Unit within 24 Months

The proposed split of the company’s business units has been listed as an avenue to drive effective resource allocations and management across the board.

American multinational company, Johnson & Johnson (NYSE: JNJ) has announced its plans to split up its consumer products and pharmaceutical companies in pursuit of new growth opportunities. As reported by CNBC, the two business units will operate as publicly traded outfits when the separation is completed. The announcement sent the stock of the company up 2.78% in the Pre-Market with each share changing hands at $167.59 before the bell.

“Following a comprehensive review, the board and management team believe that the planned separation of the consumer health business is the best way to accelerate our efforts to serve patients, consumers, and healthcare professionals, create opportunities for our talented global team, drive profitable growth, and – most importantly – improve healthcare outcomes for people around the world,” outgoing CEO Alex Gorsky said in a statement.

The proposed separation is billed to be completed within the next 18 to 24 months as regulators will be reviewing the proposed plans. As detailed by the company, the household and consumer product units, renowned as the maker of Band-Aid bandages, Aveeno and Neutrogena skincare products, and Listerine will now operate independently of the unit that manufacturers drugs, and the COVID-19 vaccine.

The company said the consumer product section will inherit ongoing lawsuits relating to cancer ailments amongst babies that use Johnson’s Baby Powder, an allegation the company has however on many occasions.

Johnson & Johnson Split to Drive Effectiveness

The proposed split of the company’s business units has been listed as an avenue to drive effective resource allocations and management across the board.

The pharmaceutical unit, which also includes advanced technologies like robotics and AI will maintain the Johnson & Johnson name and will be headed by Joaquin Duato, the company’s new Chief Executive Officer who is billed to take over from Alex Gorsky in January 2022.

“The new Johnson & Johnson and the new consumer health company would each be able to more effectively allocate resources to deliver for patients and consumers, drive growth and unlock significant value,” said Joaquin Duato.

In line with the proposed split-up, the company said it plans to keep its total dividend “at least at the same level” following the change. J&J currently sports a dividend yield of about 2.6%. The company expects the pharmaceutical unit to generate revenue of roughly $77 billion in 2021.

Johnson & Johnson ranks amongst the major players in the war against COVID-19 as its single-shot vaccine went on sale after receiving approval for Emergency Use Authorization by the US FDA back in March. The vaccine has raked in more than $502 million as the company reported in its third-quarter earnings report.

Splitting business units is not an uncommon event amongst related firms. Recently, General Electric Company (NYSE: GE) announced it will be splitting up into three separate companies, spinning out its medical unit from its aviation and energy units.

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Benjamin Godfrey

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