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Kenvue Inc (NYSE:KVUE) is again at the center of takeover speculation as the August expiration of its post–spin-off tax agreement with Johnson & Johnson (NYSE:JNJ) approaches, potentially clearing the way for a sale.
Despite concentration and uneven performance, Kenvue’s brand lineup is attractive, according to analysts at Jefferies.
Spun out from J&J in 2023, Kenvue’s portfolio of consumer health brands included Tylenol, Neutrogena, Aveeno, BAND-AID, and Listerine.
“Despite being top-heavy (Tylenol & Neutrogena are each more than 15% of US retail sales) and uneven performance, we think potential suitors would find Kenvue’s portfolio attractive,” they wrote. “Applying existing brand-building capabilities and resources could deliver a better return from Kenvue’s brands.”
There are multiple potential acquisition scenarios involving Procter & Gamble Co (NYSE:PG, ETR:PRG), Unilever PLC (LSE:ULVR), and Haleon PLC (LSE:HLN, NYSE:HLN), Jefferies believes.
The analysts noted that while Kenvue is yet to comment on the takeover speculation, three activists and a CFO change are “keeping the idea alive.”
Among the candidates, P&G stands out as the most logical acquirer, according to Jefferies. “P&G’s balance sheet, portfolio fit, and resources appear to present the best outcome,” the analysts wrote.
Jefferies estimates a potential all-cash deal could drive approximately 5% earnings per share (EPS) accretion in year one and 7.5% in year two, assuming a 20% premium and $500 million in synergies.
“P&G has a presence in eight of Kenvue’s top 10 categories, but the two have different product sets (e.g., diapers vs. diaper rash treatment),” they wrote, noting that this minimizes antitrust risk.
Unilever is also in the mix, but its ability to execute a transaction could depend on divesting its food and ice cream businesses.
“Unilever would be a bigger lift as we think it would have to exit ice cream/food to manage debt levels (2.7x with exits vs 4.8x without divesting),” the analysts wrote. “Unilever has limited exposure to consumer health (except baby bath); a deal would provide significant entry.”
A merger with Haleon could make strategic sense but offer more modest financial benefits, Jefferies believes.
“A merger of Haleon may be the 2nd best outcome in an 83% stock/17% cash deal though accretion of 3% in year two is limited,” analysts wrote.
Nonetheless, Haleon’s recent portfolio changes, including divesting ChapStick, Lamisil, and Nicotinell, could indicate readiness for consolidation. “We think there’s sufficient motivation for these firms to fill portfolio gaps via Kenvue,” the analysts wrote.
Even without an acquisition deal, the analysts remain bullish on Kenvue, maintaining their ‘Buy’ rating and $27 price target, implying upside from its current share price of about $22.
“The business is in the middle of a growth transformation where recognizable brands are finally getting the reinvestment dollars they need,” they wrote. “A step-up in innovation, marketing and tech/data investments should yield green shoots in the second half of 2025.”
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