Shares of Kimberly-Clark Corporation (NASDAQ:KMB) plunged 16.15% during the pre-market trading session on Monday, after it announced the acquisition of Kenvue Inc. (NYSE:KVUE) on Monday. Meanwhile Kenvue stock surged 20.04%.
$48.7 Billion Cash and Stock Deal Valuation
The deal involves a cash and stock transaction valuing Kenvue at an enterprise value of about $48.7 billion, based on Kimberly-Clark's closing share price on October 31.
The total deal value reflects an acquisition multiple of about 14.3 times Kenvue's last twelve months (LTM) adjusted EBITDA, or 8.8 times when factoring in anticipated run-rate synergies of $2.1 billion, net of reinvestment. The combined company aims to build on a stronger commercial platform to better meet evolving consumer needs.
According to current projections, the merged company is expected to generate about $32 billion in annual net revenue and roughly $7 billion in adjusted EBITDA in 2025. Kimberly-Clark and Kenvue anticipate around $1.9 billion in cost synergies and an additional $500 million in profit from revenue synergies, partially offset by about $300 million in reinvestment. The deal is projected to create immediate value for Kenvue shareholders through $6.8 billion in upfront cash consideration.
Strong Quarter for Kimberly-Clark, Legal Woes for Kenvue
This acquisition comes at a time when Kimberly-Clark has been making significant strides. The company’s third-quarter results showed adjusted earnings per share of $1.82, beating the analyst consensus estimate of $1.76. The quarterly sales of $4.15 billion, flat year over year, also surpassed the street view of $4.12 billion.
However, Kenvue has been embroiled in legal issues, including being named in the first-ever UK legal action over talc cancer claims along with Johnson & Johnson (NYSE:JNJ). The company was also accused by Texas Attorney General Ken Paxton of misleading pregnant women about the safety of Tylenol, despite evidence suggesting its active ingredient, acetaminophen, may increase the risk of autism and attention disorders in children.
According to Benzinga Edge Stock Rankings, Kimberly-Clark has a growth score of 71.11% and a quality rating of 43.35%. Click here to see how it compares to other leading tech companies.
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