Hold On To That Kleenex – Kimberly-Clark To Spin Off Health Care Business

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If Kimberly-Clark (KMB) ever misses its health care division in the midst of its breakup, it will still have lots of Kleenex to cry into. The manufacturer of Huggies diapers announced last week that it planned to spin off its health care division to shareholders. Like many of the companies we discuss, Kimberly-Clark is something of a serial spinner, having spun off 3 companies in the past 20 years, including an airline. In 1995, the company spun off both airline Midwest Express, which was eventually taken over by Republic Airways Holdings(RJET) and cigarette paper manufacturer Schweitzer-Mauduit(SWM). More recently, the company spun off Neenah Paper(NP) in 2004.

K-C Healthcare has been a division of the company for 4 decades, and the company conducted major acquisitions for the division of Bayliss Medical and I-Flow Corp. just a few years ago. As a standalone company, the maker of surgical masks, catheters, surgical gowns and drapes and other sterile supplies will have $1.6 Billion in annual sales, 70% of which come from North America. The company, which is headquartered in Roswell, GA with 16,000 global employees, will be led by company veteran Robert Abernathy, who joined in 1982. If the Board elects to move forward with the plan, the company expects that 100% of the division will be spun off, tax-free, to shareholders, by the end of the third quarter of 2014.

Though details are scant and the deal is far away, Barron’s provides an excellent preliminary analysis and concludes “While logical, the deal isn’t consequential. And shares remain pricey.”  A lot may change over the next year, however, and we would suggest that this certainly bears further watching.

Disclosure: The author holds no position in any stock mentioned

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