Kimberly-Clark Mulls Spinning Off Health-Care Business

Kimberly-Clark Corporation (NYSE: KMB  ) announced today that its board of directors approved a plan for its management to embark on a potential spin-off of the company's health-care business into a separate publicly traded company.

The new company would have approximately $1.6 billion in revenue and 16,000 employees, and would be headquartered in Roswell, Georgia, a suburb of Atlanta. Kimberly-Clark Health Care currently has 70% of its sales in the United States with the majority of the remaining 30% in Europe and Asia. It would also have the lead positions in the surgical and infection prevention products, and medical devices markets, which represent about 70% and 30%, respectively, of the company's business.

Year to date, the health-care segment of Kimberly-Clark has watched its sales fall by roughly 1%, and its total operating profit has remained flat. However, in the most recent quarter, the health-care division saw its profit jump by 19% relative to the same period last year.

According to Thomas Falk, the Chairman and CEO of Kimberly-Clark:

While K-C Health Care has been part of our company since the 1970s, its strategic fit and growth priorities have changed over time and we now think that pursuing a spin-off makes sense for our shareholders. This move would allow K-C Health Care to optimize its performance and flexibility to pursue its own value-creation opportunities. A spin-off would also allow us to further sharpen our focus on our consumer and K-C Professional brands.

If the spin-off does occur, Robert Abernathy, the current Kimberly-Clark Group President -- Europe, Global Nonwovens, and Continuous Improvement and Sustainability, would become CEO of the health-care company. Abernathy has been with Kimberly-Clark since 1982.

Kimberly-Clark noted the transaction would be in the form of a tax-free spinoff when current shareholders would receive 100% of the new company's stock. Morgan Stanley has been brought in to advice Kimberly-Clark in the spin-off efforts. If the board approves the transaction, it is expected the spin-off will be complete by the end of the third quarter of next year.


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  • Report this Comment On November 15, 2013, at 3:47 AM, VikingBear wrote:

    "Spinning off" a health care segment may start to look like a wonderful loss mitigation strategy to other large companies with similar structure. With the turmoil in the industry due to Obamacare and coming Federal Regulations, it might even start to be seen as kicking the rats to the pier.

    Can a segment with incalculable benefit risks survive--let alone turn a profit?

    If it goes through, it will be interesting to see where the stock price of the new entity settles.

    My best WAG is that the first day of trading will find the new owners trying to cash out, driving the price down past its "real" value for some time before a more reasonable valuation rises--to a fraction of the remaining segments.

    At the same time, the stock of the remaining segments should rise somewhat before stabilizing.

  • Report this Comment On November 15, 2013, at 1:33 PM, gearoil wrote:

    Patrick,how will the new shares be distributed to existing shareholders? what is the determining factor of how many someone would receive?

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