{"id":51615,"date":"2023-08-22T13:03:56","date_gmt":"2023-08-22T17:03:56","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/jjs-kenvue-exchange-offer-is-substantially-oversubscribed-what-happens-now\/"},"modified":"2023-08-22T13:03:58","modified_gmt":"2023-08-22T17:03:58","slug":"jjs-kenvue-exchange-offer-is-substantially-oversubscribed-what-happens-now","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=51615","title":{"rendered":"J&J’s Kenvue Exchange Offer Is Substantially Oversubscribed. What Happens Now."},"content":{"rendered":"
\n
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\n Johnson & Johnson\u2019s<\/span>
\n $35 billion exchange offer for
\n Kenvue
\n that expired last Friday was substantially oversubscribed. The result is that participating J&J holders will be able to convert only a fraction of their shares for Kenvue stock.<\/p>\n

J&J (ticker: JNJ) said Monday that the preliminary proration estimate is 23.8%, meaning that J&J holders who participated in the exchange will see just 23.8% of their shares swapped for Kenvue (KVUE) stock. The rest of J&J shares submitted by J&J investors in the exchange offer will be returned to them.<\/p>\n

\n

The exchange offer announced in late July was popular with J&J holders with about 803 million J&J shares tendered, or about 30% of the healthcare giant\u2019s outstanding stock.<\/p>\n

The exception to the proration is J&J holders who held less than 100 shares and submitted them all in the exchange offer. They will not be subject to proration. The \u201codd-lot\u201d exception to the proration attracted considerable interest from retail investors since J&J was offering roughly $107.50 in Kenvue stock for $100 in J&J shares as an inducement for its holders to make the swap.<\/p>\n

Kenvue, a consumer health business that holds such brands as Tylenol, Listerine, and Band-Aid, was taken public by J&J in May.<\/p>\n

The proration was slightly lower than some on Wall Street expected, with Barron\u2019s<\/em> reporting Friday that estimates were in the 25% to 30% range. J&J holders could have elected to submit all, some or none of their holdings in the exchange offer. The final proration figure is due to be announced on Wednesday.<\/p>\n

A J&J holder who submitted 1,000 shares in the exchange offer likely will get about 1,911 shares of Kenvue and retain 762 shares of J&J, Barron\u2019s<\/em> estimates. J&J holders who participated in the exchange offer will recent roughly 8.03 shares of Kenvue for each J&J share accepted for exchange.<\/p>\n

Kenvue stock is higher in early trading Monday, rising 1.7% to $23.25, while J&J stock is off 2.1% to $168.82.\u00a0<\/p>\n

This is what many on Wall Street expected because arbitragers had been buying J&J stock, and selling short Kenvue stock to take advantage of the roughly 7% discount on Kenvue stock that J&J offered in the exchange. Now that the arbitrage activity is over, Kenvue is rallying and J&J is under pressure. Kenvue stock had traded at around $25 before J&J announced plans for the exchange offer. With the proration slightly lower than anticipated, there could be additional upward pressure on Kenvue stock.<\/p>\n

The bull case on Kenvue is that it will soon trade to around $25, helped by its inclusion in the
\n S&P 500 index
\n which will occurred at an undetermined date after the exchange offer. Some think an announcement by S&P Dow Jones Indices on the inclusion could happen as early as this week.<\/p>\n

Citi analyst Filippo Falorni wrote in a note last week, \u201cKVUE shares have been under pressure from event-driven funds during the exchange tender period and we expect additional volatility during the averaging period (8\/14-16), and on 8\/21-22 as event-driven funds readjust their positions post-close. We anticipate KVUE will outperform in the following weeks, as shares return to trading based on fundamentals.\u201d Falorni has a $26 price target on Kenvue stock. He also cited the coming S&P 500 inclusion as a bullish factor.<\/p>\n

J&J said it would exchange nearly 191 million shares of its stock for 1.53 billion Kenvue shares that it retained after taking Kenvue public in May. After the exchange, J&J will still hold a 9.5% stake in Kenvue, roughly 180 million shares.\u00a0<\/p>\n

Some Wall Street analysts expected J&J to exchange its entire Kenvue stake, some 1.7 billion shares, in the offer, but it decided to retain an interest in the consumer-health company. <\/p>\n

The exchange offer or split-off amounts to a giant stock buyback funded by Kenvue stock, with J&J retiring about 7% of its shares.<\/p>\n

Corrections & Amplifications<\/em><\/strong>:<\/p>\n

J&J hasn\u2019t said what it plans to do with its remaining 9.5% stake in Kenvue. An earlier version of this article incorrectly said J&J plans to distribute it to shareholders.<\/p>\n

Write to Andrew Bary at andrew.bary@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Johnson & Johnson\u2019s $35 billion exchange offer for Kenvue that expired last Friday was substantially oversubscribed. The result is that participating J&J holders will be able to convert only a fraction of their shares for Kenvue stock. J&J (ticker: JNJ) said Monday that the preliminary proration estimate is 23.8%, meaning that J&J holders who participated […]<\/p>\n","protected":false},"author":1,"featured_media":51616,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-51615","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\nJ&J's Kenvue Exchange Offer Is Substantially Oversubscribed. 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