J&J breakup about more than financial engineering

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Alex Gorsky is handing investors a parting gift. The outgoing Johnson & Johnson chief is hiving off the part of the healthcare conglomerate that makes baby shampoo from the one producing cancer treatments and medical devices. It’s an easy valuation win as investors accord nearly double the multiple to consumer-derived earnings as they do pharma. Beyond that, it’s a way to give both businesses a new lease on life, and a currency to do deals.

- Johnson & Johnson said on Nov. 12 that it is planning to break into two companies, splitting off its consumer health division, which sells Band-Aids and Baby Powder, from the large pharmaceuticals unit that makes cancer drugs and vaccines.

- The company will separate its consumer health business into a new publicly traded company and is aiming to complete the planned separation in 18 to 24 months, it said in a statement. Column by Aimee Donnellan in London and Robert Cyran in New York. Editing by Rob Cox and Oliver TaslicReuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

 

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