Score one for the little guy.
Johnson & Johnson
It recently completed a $35 billion exchange offering for shares
It allowed investors who owned less than 100 shares of Johnson & Johnson (Ticker JNJ) to bid in full and not be subject to a partition that affected other participants in the deal.
These investors can take advantage of the roughly 7% discount on Kenvue shares that J&J offered as an incentive to conduct the exchange.
Owners of non-individual shares were subject to a rate of 23.2%That means less than a quarter of the Johnson & Johnson stock they provided was swapped for Kenvue, the consumer health company that owns the Band-Aid, Neutrogena and Tylenol brands. The rest was returned to them.
The result was a good $1,000-plus payday for Johnson & Johnson investors who put up 99 shares of stock in the swap offering that expired last week and closed on Wednesday. Barron suggested that this could be an attractive business opportunity for investors earlier in August.
J&J stock rose 0.6% on Friday, to $164.91. Kenvue fell 1.1% to $23.20 after massive late buying yesterday by index funds ahead of the company’s addition to the S&P 500 before trading begins Friday. Trading volume amounted to more than 300 million shares on Thursday.
Here the math is weird. An investor who bought 99 J&J shares during the last two weeks of the exchange offer at $173 (the average price over that period) would now have a Kenvue stock (symbol KVUE) worth about $186 per J&J share, Barron’s calculations. This is based on an exchange rate of 8.03 times Kenvue’s current price of $23.20. cJ&J holders received 8.03 shares of Kenvue for each J&J share in the exchange.
The result is a profit of about $1,100 for the investor who trades 99 shares.
About 6.5 million shares of Johnson & Johnson stock were offered as individual shares out of a total of 800 million shares. That’s about a billion dollars in individual bids. Johnson & Johnson accepted nearly 191 million of its shares in the offer in exchange for 1.53 billion shares of Kenvue. Johnson & Johnson still owns about 180 million shares, or a stake of 9.5%.
J&J may indicate on Wednesday what it plans to do with this stake when it provides updated financial guidance for 2023 with the company no longer controlling Kenvue. The stock may be sold.
J&J benefits because it won’t pay its quarterly dividend of $1.19 per share that’s swapped for Kenvue. The date the dividend is recorded It is Monday and the stock goes ex-dividend today.
Write to Editors@barrons.com
(tags for translation) Pharmaceuticals