Kenvue $KVUE priced at the upper end of the range at $22 and will trade today. This is a massive consumer spinoff from Johnson & Johnson $JNJ, who will still control over 90% of the voting power.
This is the kind of IPO that can get done in any market. The company has many "household name" products, including BAND-AID, Listerine, Tylenol, Neutrogena, Lubriderm, Johnson's, and Zyrtec. Many are #1 in their category.
It's not an exciting business but large, diversified, and reliable. Revenues for the April 2023 quarter are ~$3.85B versus $3.6B a year ago. Operating income will slightly increase to ~$640M versus $611M last year.
At the $22 price, the shares are at 2.7x sales, 16x operating income, and 32x net income. (all based on a run rate from Q1)
Procter & Gamble $PG is the monster CPG stock and trades at a 25x PE and almost 5x EV/Sales.
This stock should trade at a discount to P&G, but it should get at least a market multiple of 18-19x.
I'd say anything under $26 is good value.
Kenvue M&A Could Get Interesting
Now that it's out, the pace of acquisitions may accelerate.
To prepare for the IPO, they did ten acquisitions and 15 divestitures for "portfolio positioning."
The growth strategy is to leverage more online and direct marketing and sales to consumers. This is the trend, so Kenvue is not blazing any new trails, but there is plenty of opportunity in this slower-moving industry.
Could there be a Chewy $CHWY of health and wellness? Maybe. I doubt it will be Kenvue, but it's an interesting market segment.
For example, Hims & Hers $HIMS is a name we have followed since their IPO, and they have executed well over the last few years. I always thought that one of the big players would step up and buy them, but it hasn't happened yet.
When analysts initiate coverage, there may be more upside in $KVUE since they will all work hard to paint a glowing picture with high price targets.
They will have at least a dozen banks vying for the lucrative M&A advisory fees.
As we have seen with $INTC/$MBLY, there will also be a question of if, when, and how J&J may wish to further "monetize" their ownership of Kenvue.
