TOMS Capital Shakes Up Kenvue: Sale or Split on the Horizon?

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TOMS Capital pushes for Kenvue sale / Bloomberg


Hedge Fund’s Bold Move Sparks Urgency for Kenvue’s Future

Kenvue Faces New Pressure from TOMS Capital Investment Management

TOMS Capital Investment Management, a prominent New York based hedge fund, has taken a significant stake in Kenvue (NYSE:KVUE), the Band Aid and Tylenol maker, and is aggressively pushing for a full sale or strategic asset separation, according to Bloomberg News, citing sources familiar with the matter. This development follows Kenvue’s recent settlement with activist investor Starboard Value, signaling a turbulent period for the consumer health giant spun off from Johnson & Johnson (NYSE:JNJ) in 2023. While the exact size of TOMS Capital’s stake in Kenvue remains undisclosed, adding an element of mystery to their influence, their move underscores a growing investor impatience with the company’s trajectory, particularly in its underperforming skin health and beauty segment featuring brands like Neutrogena and Aveeno. Kenvue, which reported $15.5 billion in net sales for 2024, now finds itself at a crossroads as stakeholders await its response to this latest activist challenge.

TOMS Capital declined to comment on the matter, while Kenvue did not immediately respond to Reuters’ request for clarification. However, a Kenvue spokesperson told Bloomberg News, “Kenvue’s board and management team are committed to acting in the best interests of the company and all shareholders and we remain focused on accelerating sustainable, profitable growth and enhancing shareholder value.” This statement reflects Kenvue’s ongoing narrative of stability and growth, yet it does little to quell speculation about how the company will address TOMS Capital’s demands for a Kenvue sale or asset separation strategy. With a market capitalization of $46.17 billion and a portfolio of iconic brands, Kenvue’s next steps could significantly impact the consumer health industry and investor confidence.

Background on Kenvue: A Consumer Health Powerhouse Under Scrutiny

Kenvue emerged as an independent entity following its spin off from Johnson & Johnson in 2023, positioning itself as the world’s largest pure play consumer health company by revenue. Its extensive portfolio spans three key segments: Self Care, featuring pain relief and allergy products like Tylenol; Skin Health and Beauty, home to skincare staples Neutrogena and Aveeno; and Essential Health, which includes wound care leader Band Aid and oral care brand Listerine. These brands, backed by over 135 years of heritage and scientific innovation, reach approximately 1.2 billion consumers globally, according to Kenvue’s official statements. Headquartered in Skillman, New Jersey, with plans to relocate to Summit, New Jersey, Kenvue has built a reputation for reliability, yet its financial performance has drawn mixed reviews, fueling activist investor interest in a potential Kenvue restructuring or sale.

Financially, Kenvue’s 2024 results show net sales of $15.5 billion, a modest 0.1% increase from $15.4 billion in 2023, with organic growth of 1.5%. Adjusted diluted earnings per share stood at $1.14, down from $1.29 the previous year, though gross profit margins improved by 200 basis points, thanks to the company’s “Vue Forward” cost saving initiative. However, quarterly performance reveals inconsistencies, such as a 2.7% net sales decline in Q4 2023 and a 0.4% drop in Q3 2024, despite a 0.9% organic growth in the latter. These fluctuations, particularly in the Skin Health and Beauty segment, have caught the eye of investors like Starboard Value and now TOMS Capital, who see untapped potential in a Kenvue sale or asset separation strategy to unlock shareholder value.

TOMS Capital’s Strategic Push: Sale or Separation in Focus

TOMS Capital’s entry into Kenvue’s shareholder base marks a bold escalation in the company’s activist saga. Bloomberg News reported that the hedge fund is advocating for either a complete sale of Kenvue or a separation of certain assets, potentially targeting the lagging Skin Health and Beauty segment, which has struggled to maintain momentum. This push aligns with TOMS Capital’s track record of activist investing, seen in prior engagements with companies like Colgate Palmolive and Kellanova, where they sought to drive value through structural changes. While the size of their Kenvue stake remains undisclosed, even a modest holding could amplify their voice, especially following Starboard Value’s recent success in securing three board seats after acquiring a 1.1% stake (approximately 22 million shares).

The idea of a full Kenvue sale could attract significant interest, given its $46.17 billion market cap and strong brand equity. Potential buyers might include private equity firms or larger consumer goods conglomerates looking to bolster their portfolios with household names like Band Aid and Tylenol. Alternatively, an asset separation could see Kenvue divest its Skin Health and Beauty segment, allowing the company to refocus on high performing areas like Self Care and Essential Health, which account for substantial revenue streams. Such a move could streamline operations and boost profitability, addressing criticisms of lackluster growth that have plagued Kenvue since its spin off.

Recent Activist History: Starboard Value’s Influence

Kenvue’s encounter with TOMS Capital comes on the heels of a settled proxy battle with Starboard Value, resolved earlier this month. Starboard, which built its stake in October 2024, criticized Kenvue’s Skin Health and Beauty performance and pushed for governance changes. The resolution saw Kenvue appoint three new directors, including Starboard CEO Jeffrey Smith, Sarah Hofstetter (President of Profitero), and Erica Mann (former Bayer Consumer Health head), signaling a willingness to adapt under pressure. This settlement, detailed in a CNBC report, highlights Kenvue’s openness to dialogue with activists, a dynamic that may shape its response to TOMS Capital’s demands for a Kenvue sale or asset separation strategy.

The Starboard episode underscores a broader trend of investor dissatisfaction with Kenvue’s post spin off performance. While the company has touted initiatives like increased marketing investment and productivity gains, its stock has fluctuated within a 52 week range of $17.67 to $24.46, with a price to earnings ratio of 43.57 reflecting high market expectations. TOMS Capital’s intervention could amplify these pressures, forcing Kenvue to accelerate its strategic review and potentially reshape its future.

What’s at Stake: Implications for Kenvue and Shareholders

TOMS Capital’s push for a Kenvue sale or asset separation carries significant implications for the company, its shareholders, and the broader consumer health market. A full sale could deliver an immediate premium to investors, capitalizing on Kenvue’s robust brand portfolio and $15.5 billion revenue base. However, it would mark the end of Kenvue’s brief tenure as an independent entity, potentially raising questions about the viability of the Johnson & Johnson spin off strategy. On the other hand, an asset separation could enhance focus and profitability, particularly if Kenvue sheds underperforming segments, though it risks disrupting operational synergies and brand cohesion.

For shareholders, the outcome could mean heightened volatility in the near term as Kenvue weighs its options. The company’s emphasis on “sustainable, profitable growth” and “enhancing shareholder value,” as reiterated in its Bloomberg statement, suggests a measured approach, but the urgency of TOMS Capital’s demands may force quicker action. Investors will also watch for signals from Kenvue’s management and board, now bolstered by Starboard appointees, as they navigate this dual activist challenge.

Industry Context and Future Outlook

Kenvue operates in a competitive consumer health landscape, where brands must balance innovation, cost efficiency, and market share. Its peers, like Procter & Gamble and Unilever, have faced similar activist pressures, often resulting in divestitures or strategic pivots. TOMS Capital’s move reflects a belief that Kenvue’s current structure may not fully maximize its potential, a sentiment echoed by Starboard’s earlier critique. As the company prepares its response, likely in the coming weeks given the timing of this report, the industry will be watching to see if Kenvue opts for a transformative Kenvue sale or asset separation strategy or doubles down on its existing path.

For now, the lack of detailed commentary from TOMS Capital and Kenvue leaves room for speculation. Stakeholders can expect updates as discussions progress, with Kenvue’s board and management under the spotlight to deliver a plan that satisfies both activist investors and long term shareholders. Whether through a sale, separation, or internal overhaul, Kenvue’s next chapter promises to be a defining moment in its evolution as a standalone consumer health leader.

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