Kimberly-Clark (NYSE:KMB) said it’s planning to spin out its medical device and health products division as a separate public company, prompting investors to bid its stock up to a 52-week high yesterday and even higher today in pre-market trading.
Dallas-based Kimberly-Clark said its KC-Health Care division threw off $1.6 billion in sales last year, with about 30% of that coming from medical devices and the balance from surgical and infection-prevention products. The unit, is based in Roswell, Ga.
"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. This announcement is further evidence of our focus on creating shareholder value and how we use portfolio management to run our company," chairman & CEO Thomas Falk said in prepared remarks.
KMB shares hit $109.91 apiece yesterday on the news, a 52-week high, before subsiding to a $109.71 close. Shares were up another 2.5% in pre-market trading today, at $112.50 each.
Kimberly-Clark said 1 of its group presidents, Robert Abernathy, would be the spinout’s new CEO, with current global healthcare president Joanne Bauer staying in that role to work on the separation before retiring if it closes.
"Robert is a seasoned executive with a long track record of success and I’m confident he will be a terrific leader of the new company," Falk said. "He is excited about working with the many talented individuals on the health care team to create shareholder value as a stand-alone company."
The company plans to examine the potential spinout, with a final recommendation expected "in the next several months," according to a press release. If approved, the move would likely be consummated by the end of the 3rd quarter of 2014 as a tax-free distribution of 100% of the new entity’s stock to KMB shareholders.
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