Jefferies has moved Kenvue to a Hold rating after shareholders of the two companies overwhelmingly supported the proposed transaction between Kenvue and Kimberly-Clark. The broker said the voting results - 96% of Kimberly-Clark shares and 99% of Kenvue shares in favor at a Jan. 29 special meeting - remove a key obstacle to closing, and leave the stock trading close to the implied deal value.
While regulatory and antitrust approvals remain necessary before completion, Jefferies characterized the likelihood that the transaction will not close as low, including limited risk from litigation outcomes or a competing bid. The firm expects the deal to complete in the fourth quarter.
Because Kenvue shares are trading near the implied offer value of roughly $18 per share, Jefferies removed the stock from its Franchise Pick list. The broker flagged two main ongoing concerns: lingering litigation uncertainty and softening trends at Kenvue. Despite those issues, Jefferies noted that Kimberly-Clark's management appears comfortable with the transaction and is focused on executing a longer-term turnaround for underperforming brands.
Jefferies summarized Kimberly-Clark's strategic rationale for the deal as a means to increase exposure to faster-growing consumer categories and new markets, while noting limited overlap between the two companies' portfolios. The broker said that, although integration will require time, the combined business would rank among the largest global consumer packaged goods companies.
Management projections provided at the time the deal was announced were reiterated in Jefferies' note. Those projections include 2025 revenue of about $32 billion and adjusted EBITDA of roughly $7 billion. Expected synergies include $1.9 billion of cost savings within three years, plus $200 million of revenue synergies within four years, net of reinvestment. Cash costs associated with the transaction are estimated at $2.5 billion over the first two years after closing.
On the balance sheet impact, Jefferies said leverage is expected to increase to about 2.7x pro forma EBITDA in 2025 from 1.9x pre-deal. Management is targeting a reduction back to roughly 2.0x within 24 months in order to preserve the current credit rating. Earnings per share are projected to be diluted by mid-single digits in the first year following close, with accretion expected in the second year.
Reflecting weaker business trends and currency effects, Jefferies updated its financial forecasts. The firm now models organic sales down 1.8% in the fourth quarter of 2025 and EPS of $0.23, a decline of 11% versus prior assumptions. For 2026, Jefferies expects 1.2% organic growth and 3.3% total growth, which includes a two percentage point foreign exchange benefit, and EPS of $1.11, an increase of 7%.
Jefferies reduced its price target for Kenvue to $18, which equates to 16 times its 2026 EPS estimate and aligns with the implied consideration structure of $3.50 in cash plus 0.14625 Kimberly-Clark shares.
Contextual note - The voting results and the financial projections cited above are those presented by Jefferies in its analysis around the proposed transaction.