As befits a maker of toilet tissue, Kimberly-Clark’s chief executive Mike Hsu has come up with a deal that stacks up on paper. But investors fear that his proposed acquisition of paracetamol-and-mouthwash producer Kenvue could flush value down the pipes.
Hsu’s $48.7bn bid, payable mostly in his company’s shares, has a lot to recommend it. Kimberly-Clark has long been laying the groundwork for just such a move. The Huggies and Kleenex maker exited its low-margin private-label nappies business and sold a majority stake in non-core assets such as its international tissue paper operations.
By merging with Kenvue, it would create a consumer goods business with $32bn a year in sales, and a potential to reduce annual costs by $1.9bn. That, taxed and capitalised, would be equivalent to a lump sum of about $15bn. Kimberly-Clark shareholders would end up with 54 per cent of the new company, a stake whose value would be roughly aligned with the group’s worth pre-announcement, whereas, between the cash and their share of the new group, Kenvue’s would get a 50 per cent uplift to the value of the company on Friday.