When Kimberly-Clark (KMB) bid for Kenvue (KVUE), sellers sent its shares to a low of $99.22. KMB stock traded between $120 - $150.45 before its proposal to buy the Tylenol pain relief supplier.
Kenvue rose from a low of $14.02 earlier this month to nearly $17.00. Last week, it closed at a $31.88 billion valuation, well below the $40 billion offer. Stock markets are betting that Kimberly-Clark cannot leverage its weak balance sheet to close the deal.
This sets up a speculative play for arbitrageurs. Bet that Kimberly-Clark will not close the deal, Kenvue will find another buyer, and at least two firms will bid for it.
KMB stock will rise if the deal falls through. It is better off without Kenvue.
Unilever (UL) is a potential buyer. UL stock trades near the bottom of its $54.32 - $65.66 range in the last year. The UK-based firm would expand its global addressable market by owning Kenvue.
Procter & Gamble (PG) is an even better fit. Its market capitalization of around $355 billion is double that of Unilever. PG stock trades close to its 52-week low. In late October, Kenvue hired P&G executive Carlos De Jesus. The Group president of North America should give Kenvue the operational leadership for P&G.
Your Takeaway
P&G and UL stock need a growth catalyst. Kenvue’s rich product line-up includes well-known brands like Tylenol, Band-Aid, Aveeno, Listerine, and Neutrogena. They complement both firms. P&G is a better fit, since they are closer: both are American-based firms.
