Kimberly-Clark Corp. (KMB) is mulling a spinoff of its
health-care business, potentially unloading a division that
generates about $1.6 billion in annual sales but represents the
consumer-products giant's smallest business.
The division sells surgical and infection prevention products
for the operating room and a portfolio of medical devices. Products
are primarily sold under the Kimberly-Clark and ON-Q brand
names.
"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 spinoff makes sense for our
shareholders," Chairman and Chief Executive Thomas J. Falk
said.
Investors cheered the news, sending shares up 6.6% to $116.90 in
after-hours trading.
Kimberly-Clark -- the maker of Huggies diapers, Kleenex tissue
and Cottonelle toilet maker -- wouldn't be the first consumer
products giant to mull such a move. Kraft Foods Group Inc. (KRFT)
recently spun off its global snacks business to create Mondelez
International Inc. (MDLZ), while activist shareholder Nelson Peltz
earlier this year urged PepsiCo Inc. (PEP) to spin off its
underperforming beverage business and acquire Mondelez.
Kimberly-Clark said if a spinoff were to occur, the transaction
would likely be completed by the end of the third quarter next
year. The company expects the deal would be in the form of a
tax-free distribution of the new company's stock to existing
Kimberly-Clark shareholders.
The health-care division generated $1.62 billion in sales in
2012, rising 1% from the prior year, but made up a small piece of
the total $21.1 billion. That growth underperformed the company's
largest business segment, personal care, but was better than the
sales declines posted by the consumer tissue and K-C professional
divisions.
The health-care division derives about 70% of sales from North
America, and most of the rest in Europe and Asia. The business had
more than 16,000 employees at the end of 2012, making up about 28%
of Kimberly-Clark's total at the time.
If the spinoff were to occur, current Kimberly-Clark executive
Robert Abernathy would become chief executive of the new
health-care company. Mr. Abernathy has held various senior
management positions since joining the company in 1982.
Morgan Stanley (MS) has been retained to assist the company as
it mulls the transaction. Kimberly-Clark intends to hold a news
conference on Friday to discuss the potential spinoff.
Write to John Kell at john.kell@wsj.com
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