The last two months have been brutal for Tylenol maker Kenvue (KVUE), which shed 31% of its value in September and October alone on allegations of a link between the pain reliever and rising autism diagnoses in the U.S.
It should be noted, of course, that the Secretary of Health and Human Services, Robert F. Kennedy Jr., subsequently walked back the administration’s efforts to link acetaminophen use during pregnancy with autism, saying, “We’ve all said from the beginning that the causative association between Tylenol given in pregnancy … is not sufficient to say it definitely caused autism, but it is very suggestive.”
But the damage, at least for shareholders, has largely been done, as the company has lost billions of dollars in market cap and now faces (along with former parent company Johnson & Johnson (JNJ), from which Kenvue was spun off in 2023) a lawsuit, filed by the State of Texas, for allegedly deceptive marketing practices.
Setting aside the lawsuit (which could be settled tomorrow or drawn out through discovery and appeals for years), KVUE shareholders received something of a lifeline from consumer goods and personal care company Kimberly-Clark (KMB), which offered to buy out the embattled healthcare company in a deal worth $48.7 billion on Monday morning.
The offer, a combination of cash and stock, would see KVUE shareholders receive $3.50 in cash and 0.14625 shares of KMB for each share of KVUE.
As a result of the offer, shares of Kenvue are trading 15.6% higher on the day (as of midday), while shares of Kimberly-Clark are lower by 12.7% (a typical reaction for the acquiring company in a deal announcement like this).
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If you already own KVUE, this offer is certainly a reprieve, but it does beg the question of what to do now.
Kenvue (KVUE): What to Do Now?
Before we consider the options available to shareholders, let’s take a look at how the market is valuing shares relative to the offer.
In the mid-16s, shares of KVUE are trading at a meaningful discount to the value of the buyout, given that KMG is hovering near 104.
The proposed offer of $3.50 in cash plus 0.14625 shares of KMB would be worth just below $19 if the exchange were to take place immediately (0.14625 KMB x 104 per share = $15.21; $15.21 + $3.50 = $18.71).
Given that calculation, shares of KVUE are trading at a 13% discount to the offer value.
That discount comprises two parts, namely, time value and uncertainty value.
The time value element is the market’s way of pricing in the amount of time that your investment is essentially passive and waiting for deal completion. In my experience, something in the mid-single digits is common for acquisitions that are essentially set in stone and unlikely to face regulatory challenges or pushback from shareholders, which this one very well could.
The second element is the added discount due to the uncertainty of the deal going through.
We saw this in full effect with the contentious acquisition of U.S. Steel by Nippon Steel. The $15 billion offer was approved by shareholders in April 2024 but not finalized until June of this year.
Due to the high-profile political disputes around the acquisition, U.S. Steel traded at a steep discount for months, as you can see in the chart below.
In April 2025, a year after shareholders voted to accept the deal, shares of U.S. Steel were trading below 40, more than a 37% discount to the buyout offer at $55/share.
KVUE’s 13% discount to the offer value doesn’t rise to that level of uncertainty, but it is pricing in a bit of friction.
So, given that context and returning to the question at hand, is KVUE a buy, hold or sell at this point?
The questions of selling or buying seem the most straightforward to me, so let’s start there.
If you’re a short-term trader who saw KVUE trading at a steep discount on the HHS fallout and took a trading position, I don’t know that you’ll find a better offer in the wings. In that case, taking the quick double-digit percentage pop is a reasonable course of action.
On the buying side of the equation, you’re effectively buying discounted shares of KMB given the terms of the offer, but you can only realize the value of the discount if the offer is completed.
If, on the other hand, there’s regulatory pushback (more on this in a minute), your shares of KVUE (which are already something of a KMB equivalent) would fall while KMB shares would rise as the cost of the acquisition ceases to be an overhang.
If you’re considering buying shares here, the better move may be simply to buy shares of KMB directly and avoid the machinations of the merger entirely.
As to whether longer-term shareholders should continue to maintain their positions while waiting for the deal to go through, that’s a closer call.
The Case for Holding KVUE
I suspect that many KVUE shareholders are in it for the dividend (currently yielding 5.8%), and, for the time being, there’s been no change to Kenvue’s payouts (although a large settlement in the Texas case, should that be the outcome, could change that, as could potential lost sales due to the HHS allegations).
Plus, KMB offers its own attractive dividend (currently yielding 4.2%).
In this scenario, you’re enjoying strong dividends now and would expect to continue getting solid dividends on completion of the acquisition from your KMB shares. On top of that, shares are still trading at a 13% discount to the offer value.
There’s a pretty strong case to be made for simply continuing to hold your shares, collecting your income, and realizing the added value of the acquisition, however long that takes to play out.
The risk of taking that approach is a question of politics. Specifically, could political vindictiveness by the administration torpedo the buyout entirely, say, through punitive regulatory pushback?
We’ve seen those risks crop up in other arenas (large media companies, for example), so we can’t rule it out entirely.
But, for the time being, the market isn’t assigning the same level of risk to political interference that we saw in the case of U.S. Steel (where shares traded at triple the relative discount to the offer price).
And, as a final point, it’s also worth noting that Kimberly-Clark did its own assessment of the risks of the merger (which presumably included its own calculus of the risk of pushback by the administration and potential liability from the Texas suit) and decided to move forward in the face of those risks.
I won’t argue with long-term shareholders who take the deal announcement as an opportunity to get out of a tricky situation, but for the time being, it sure seems like the market’s assessment is that the best course of action is to continue to hold.
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