Johnson & Johnson Spin-off

Johnson & Johnson Spin-off
Case Code: FINC201
Case Length: 12 Pages
Period: 1996- 2021
Pub Date: 2023
Teaching Note: Available
Price: Rs.200
Organization: Johnson Corporation’s (J&J)
Industry: Healthcare and Services
Countries: United States
Themes: M&A, Corporate Restructuring
Johnson & Johnson Spin-off
Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

The case study is about Johnson & Johnson Corporation’s (J&J) spin-off of its consumer health business. The company came into existence in the year 1886 and grew significantly over the years. Over a period of 135 years, J&J expanded its business to countries around the world but it also faced various issues related to its products, among them its baby powder. The case highlights how these issues affected the performance of the company and increased its liability to about US$24 billion by the end of September 2021. To rid itself of such liabilities, J&J came up with the plan of restructuring its business and started looking for various restructuring alternatives.

J&J decided to spin off its consumer health business to reduce its debt burden. With this separation, the company was expected to increase its focus on each business, strengthen their financial position, and offer more products and better health products to patients and consumers. It remained to be seen whether the decision of a spin-off was really going to help J&J revamp its position.

Issues

The case is structured to achieve the following teaching objectives:

  • Analyze the financials of a company in a pre-spin-off situation.
  • Understand whether spin-offs could be a route company can use to improve their financial position.
  • Understand the difference between spin-off and other restructuring alternatives.

Contents

Keywords

J&J; Spin-off; Corporate Restructuring; Types of Divestitures; Two-step bankruptcy; Business strategy; Evaluation of Spin-Off; Consumer health business; Return on Equity; DuPont Analysis; Analysis of Divisional Performance; Rationale of Spin-off; Restructuring alternatives

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