Why is Johnson & Johnson splitting up?

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When you hear the name “Johnson & Johnson” (J&J), what comes to mind?

Band-Aids? Baby powder? Listerine? Tylenol?

J&J does own those brands, but consumer products actually make up a fraction of its sales.

A big change is coming

Per CNBC, the $434B+ health care giant will spin off the consumer business over the next 18-24 months. After the transaction, there will be 2 public companies:

• Consumer products: This division is on pace for $15B this year
• Pharmaceuticals and medical devices: These 2 divisions will retain the J&J name and are projected to make ~$77B in 2021

The consumer division will also inherit a lawsuit related to charges that J&J Baby Powder causes cancer (the company denies it and says the legal action has nothing to do with the split).

Why the move?

Per The Wall Street Journal, J&J is separating “its high-margin but less predictable prescription-drug and medical-device businesses from its storied but slower-growing consumer group.”

J&J rivals — like Pfizer and Merck — also dumped their consumer businesses to focus on pharma, an industry thrust into the spotlight by the pandemic.

More broadly, the conglomerate model of putting everything under one roof is going out of fashion: GE is splitting into 3 companies (so is Toshiba).

Guess you could say they are ripping the Band-Aid off of their corporate structures.