Johnson & Johnson last November reported that it aims to spin off a new publicly traded corporation by November 2023. The news was no surprise to Wall Street.
Healthcare Equity Strategist at Oppenheimer, Jared Holz, said the community of analysts has been debating over dividing out Johnson & Johnson for several years now. This is while the spinoff is taking place in a dramatic situation and people are interested to know why do it now, he added.
According to market capitalization, Johnson & Johnson is the largest pharmaceutical firm in the U.S.
Graded 36 on the Fortune 500 List of largest U.S. companies in 2021, following overall revenue, the firm has observed dividend growth for almost 60 years and surpassed the market index of S&P 500 persistently over the last 25 years.
In this regard, Louise Chen, managing director at Cantor Fitzgerald, said to be consistent with the market flow, companies should work on their core capabilities and diversify. There are already various examples of how huge pharmaceutical companies plucking out non-operating assets, he also added.
As yet, investors have responded to derivation delicately. Chen said that there’s risk in dividing out the consumer business. He also said I believe that investors are not still completely convinced of the potential independent earnings of the two companies.
Perhaps there are headwinds in the spinoff. J&J company has been tackling legal struggles during the last years: many of the challenges still exist which might cause currently unknown fines and settlements.