Dallas-based Kimberly-Clark, maker of Huggies diapers, Depend undergarments and Kleenex tissues, said a spinoff would allow it focus on its consumer and professional brands. The healthcare business, which makes surgical and infection prevention products and medical devices, as a standalone would have about $1.6 billion in annual sales.
Kimberly-Clark overall generates about $21 billion in annual revenue. The health unit, which is based in Roswell, Ga., employs 16,000 and generates about 70% of its sales from North America.
The company said the spinoff, which if approved by the board is expected to be completed by the end of the third quarter of 2014, would be designed to be tax-free to shareholders and would create an independent publicly traded company.
"While K-C Health Care has been part of our company since the 1970's, its strategic fit and growth priorities have changed over time and we now think that pursuing a spin-off makes sense for our shareholders," said Kimberly-Clark chairman and CEOThomas J. Falk. "This announcement is further evidence of our focus on creating shareholder value and how we use portfolio management to run our company."
Falk said that the spin would allow the health business to streamline its operations and give it the "flexibility to pursue its own value-creation opportunities." The executive told television reporters Friday morning that Kimberly-Clark would be open to a sale of the health business instead of a spinoff, but noted the unit has a low tax base that makes a spinoff more appealing.
Post-deal, Robert E. Abernathy, who currently runs Kimberly-Clark's Europe and global nonwovens operations, will be CEO of the health unit. Abernathy has been with Kimberly-Clark since 1982 and ran the health business from 1997 to 2004.--By Lou Whiteman in Atlanta.