Health-care conglomerate Johnson & Johnson announced plans Friday to split its consumer products business from its pharmaceutical and medical device operations, creating two publicly traded companies. The news sent shares higher in premarket trading.
The separation will sheer off its household products unit, maker of Aveeno and Neutrogena skin care products and Listerine, from its riskier, but faster growing division that makes and sells prescription drugs and medical devices, including its Covid-19 vaccine.
“Throughout our storied history, Johnson & Johnson has demonstrated that we can deliver results that benefit all our stakeholders, and we must continually be evolving our business to provide value today, tomorrow and in the decades ahead,” outgoing CEO Alex Gorsky said in a statement.
The company said it hopes to complete the transaction in 18 to 24 months. The pharmaceutical and medical device division, which includes advanced technologies like robotics and AI, would retain the name Johnson & Johnson and have J&J’s incoming CEO Joaquin Duato at its helm. Duato is taking over the role in January as previously planned. Those segments are expected to generate roughly $77 billion in revenue while the consumer products division is forecast to sell about $15 billion in products this year, the company said.
Its new consumer products company will also inherit litigation stemming from lawsuits over claims that its Johnson’s Baby Powder causes cancer, allegations the company has vehemently denied.
Shares of J&J were up more than 3% in premarket trading after the announcement.
J&J was already undergoing a major transition with Gorsky’s departure as CEO. He will remain on as executive chairman of the new J&J, the company said.
Additionally, the company said it planned to keep its total dividend “at least at the same level” following the change. J&J currently sports a divided yield of about 2.6%.
The announcement is the second time this week that a major U.S. company has announced a plan to split itself, following General Electric.
The news was first reported by the Wall Street Journal.
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