J&J exchange for KVUE??

[ripvanwinkle]

I got a message from Schwab that J&J (Johnson & Johnson) is offering to exchange shares for KVUE. J&J pays dividends while KVUE does not. Would you exchange? Is this a good deal? Why would they do this?

"Johnson & Johnson (J&J) is offering to exchange up to an aggregate of 1,533,830,450 shares of Kenvue Inc. common stock (Symbol KVUE).

·The number of shares of J&J common stock that will be accepted if the exchange offer is completed will depend on the final Exchange Ratio and the number of shares of J&J common stock tendered in the exchange offer.

·For each $100 in value of J&J common stock accepted for exchange, holders will receive:

¨a value* of approximately $107.53 of Kenvue common stock subject to an upper limit** of 8.0549 shares of Kenvue common stock per share of J&J common stock and will be subject to proration. Holders will receive cash in lieu of fractional shares".

[dannylion]

It seems that J&J owns a big chunk of Kenvue (consumer health) shares, which J&J has decided to split off and concentrate on its pharmaceutical and medtech elements.  Companies often do this when they have acquired businesses that seemed like a good fit for their core business but later are no longer working out as expected or they decide they are overextended and need to focus on one area of their industry or some other reason.  Dupont did it not long ago with Chemours and Merck recently spun off Organon.  I exchanged a small number of Dupont and Merck shares when they did their spin-offs as the overall affect was minimal with regard to share price and dividends.  I do not plan to opt for an exchange of J&J shares because the Kenvue dividend is about one-sixth that of J&J, and at this point in my life I am realigning assets to maximize income in preparation for a move to a senior living community where my expenses will only increase as I get older and more feeble.  Sometimes it is a good idea to participate in the exchange, other times not so much.  In my opinion, this time it is not so much, at least with regard to my goals.  YMMV.  

ETA:  At least this one is voluntary, and we can decide what works best for us.  AT&T spun off Warner Bros. Discovery and allocated AT&T shareholders an amount of WBD shares proportional to their AT&T holdings.  The exchange was not voluntary.  The result was a lower AT&T share price and a reduced dividend.   AT&T has been a historical dividend powerhouse.  WBD does not pay a dividend.  WBD shares have been languishing of late, possibly due to the writers' and SAG strikes.  I plan to sell my WBD shares at some point and reinvest the money in AT&T as it is still a viable business and the share price likely will recover.  The dividend loss was due to the reduction in the number of shares, so that will improve as well.  

[nittanycheme]

Kevnue Stock was recently listed on the exchange as part of the spin off.  The exchange is because JnJ is getting ready to divest the majority of the Kenvue stock they still hold (they retained like 90% of the stock) to complete the spin off.  

Kenvue is providing a quarterly dividend.  link   This is the first quarter that the company has formally existed.  Its really a decision on if you want to own stock in the consumer health sector (OTC drugs, cosmetics, skin care, bandaids, etc.) or stay with JnJ which retained the prescription pharmaceuticals, biotech and med device businesses.  The kenvue dividend is smaller than the JnJ one - but their stock price is also a lot lower so you will get 8 kenvue shares for each share of JnJ you have (based on the example above).  Technically, according to the example, the kenvue dividend should be 1/8th of the JnJ based on the stock price difference.  Whether that stays that way, who knows.  I have yet to decide what I want to do with it.  I think you can also only exchange a portion of your stock - I don't think its all or nothing.  But I haven't waded through the giant book they sent in the mail about it yet.