Kimberly-Clark Corporation (KMB -0.98%) 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.
