Activist Investors Target Kenvue, Pushing for Strategic Changes

Johnson & Johnson's consumer health spinout Kenvue is facing increasing pressure from activist investors, with two separate firms now advocating for significant changes to unlock shareholder value. This development marks a turbulent period for the recently independent company, known for popular brands such as Band-Aid, Listerine, and Tylenol.

Starboard Value Secures Board Seats

Earlier this month, Kenvue reached a "cooperation agreement" with activist investor Starboard Value, resulting in immediate changes to the company's board of directors. Jeffrey Smith, CEO of Starboard Value, has joined Kenvue's board along with two other new appointees: Sarah Hofstetter, president of e-commerce analytics company Profitero, and Erica Mann, Bayer's former consumer head.

The agreement expands Kenvue's board to 14 directors, with plans to reduce it to 13 at the upcoming annual shareholder meeting. Starboard Value, which owns approximately 22,000 shares, has agreed to vote in favor of Kenvue's board nominees and withdraw its own slate of proposed candidates.

Kenvue's chairman, Larry Merlo, expressed optimism about the new directors, stating that their insight would be "very beneficial" to the company. However, this move comes in the wake of Kenvue's disappointing financial performance, with the company missing its 2024 net sales growth expectations and projecting flat to negative growth for 2025.

TOMS Capital Pushes for Asset Sales

In a new development reported by Bloomberg, another activist investor has emerged to challenge Kenvue's current strategy. TOMS Capital Investment Management has acquired a stake in the company and is advocating for more drastic measures, including a potential full sale of the company or the separation of some assets.

While Kenvue has not commented specifically on TOMS Capital's involvement, a company spokesperson emphasized their commitment to "acting in the best interests of the company and all shareholders" and focusing on "accelerating sustainable, profitable growth and enhancing shareholder value."

Financial Performance and Market Reaction

Kenvue's stock performance has been relatively stable since its initial public offering, with shares currently trading at just over $23. The company's IPO, which raised $41 billion, was the largest in U.S. markets in over a year at the time of its debut.

However, Kenvue's financial results have fallen short of expectations. The company reported a mere 0.1% sales growth in 2024, significantly below its projected 1% to 3% growth. This underperformance has likely contributed to the increased scrutiny from activist investors, who see potential for improvement in the company's operations and strategic direction.

As Kenvue navigates these challenges, the pharmaceutical industry will be watching closely to see how the company responds to activist pressure and whether it can successfully implement changes to drive growth and shareholder value.