What Drove Kimberly-Clark’s $40 Billion Deal for Tylenol Maker Kenvue

SPEAKER_1 (0:03)

What's driving the markets this week? What's on investors' minds as they look ahead? Find out in 10 minutes or less on the Markets Podcast from Goldman Sachs. Listen now.

Alex Ossola (0:18)

What Kleenex maker Kimberly-Clark gets out of buying the company behind Tylenol. Plus, young Americans are feeling the economic pinch, and that's hitting Chipotle. And three key races in tomorrow's election will gauge voters' frustration with the economy.

Aaron Zittner (0:34)

Democrats are really unifying around the theme of affordability. They're saying, we're the ones who have the plan to lower costs for people.

Alex Ossola (0:42)

It's Monday, November 3rd. I'm Alex Ossola for The Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that move the world today.

In one of the biggest takeovers of the year, Kimberly-Clark has agreed to buy Tylenol maker Kenvue for more than $40 billion. The cash-in-stock deal would create a company with $32 billion in annual revenue, whose brands include household staples like Huggies, Kleenex, Cottonelle Toilet Paper, and Listerine Mouthwash, plus, of course, Tylenol. WSJ business reporter Natasha Khan tells us what Kimberly-Clark gets out of the deal.

Natasha Khan (1:20)

One of the things that is really interesting about this deal is that Kenvue operates in this lucrative area in consumer health care. It's not pharmaceuticals, but it's over-the-counter medicines, it's wellness. Kimberly-Clark has said they see a lot more growth opportunities in the consumer health space.

Alex Ossola (1:41)

Kimberly-Clark has lagged behind rivals Unilever and Procter & Gamble, and Kenvue's popular health and wellness products could give it a stronger foothold in the consumer health care market.

Natasha Khan (1:51)

Their messaging is really on the synergies that can be found in the deal. For example, people buying Huggies diapers could then now also buy Johnson's baby wash or, you know, baby cream.

Alex Ossola (2:02)

But shares of Kenvue, which spun off from Johnson & Johnson in 2023, have been under stress since President Trump said in September that acetaminophen, the active ingredient in Tylenol, is a potential cause of autism.

SPEAKER_6 (2:14)

So taking Tylenol is not good. All right, I'll say it. It's not good.

Alex Ossola (2:22)

Then last week, there was a high-profile lawsuit against the company.

SPEAKER_7 (2:26)

Texas is suing the makers of Tylenol over an unproven link to autism.

SPEAKER_8 (2:30)

The Republican attorney general of Texas claims that the company's hid risks that the drug posed to the brain development of children.

Alex Ossola (2:39)

Natasha said executives talking about the deal with investors and analysts this morning didn't really get into that.

Natasha Khan (2:44)

There were questions that were raised about the risk associated with this ongoing issue with Tylenol, but it was not really addressed.

Alex Ossola (2:53)

Kenvue has said the accusations that Tylenol is linked to autism are baseless, and both scientists and medical groups say President Trump's claims are unfounded. Trading on the Deal News today, Kenvue's shares rose more than 12 percent, while Kimberly-Clark's stock slid 14.6 percent. In broader markets, stocks were mixed after a record-setting October. The Dow dropped half a percent, while the S&P 500 edged higher, and the Nasdaq gained roughly half a percent.

And in two updates from Washington, the federal government said today that it will pay some snap food benefits for the month of November. A federal judge in Rhode Island last week ordered the government to use emergency funds to keep SNAP going during the government shutdown. The government today says there is about $4.7 billion in emergency funding, enough to cover about half of monthly payments for eligible households. SNAP benefits typically total about $8 billion a month for approximately 42 million people. The program formerly known as food stamps helps poor and disabled people buy food. The government is warning that there could also be delayed payments in some states. And we're exclusively reporting that hundreds of travel businesses are asking Congress to end the government shutdown by immediately passing a straightforward spending bill. The casinos, hotels and convention bureaus said in a letter to congressional leaders that they're worried about the holiday travel season. Since the shutdown more than a month ago, government employees like air traffic controllers have gone without pay, leading to delays and safety concerns. The business' letter adds to the pressure on Democrats to give up their drive for a broader deal before voting to reopen the government.

Burrito chain Chipotle has spent years cultivating younger customers. It's pitched its burritos and bowls as packed with protein for gym bros and healthy eaters and sponsored video game competitions. Some dedicated fans even call themselves the Chipotle Boys. Now though, that bet seems to be unravelling. The company said last week that customer traffic is sliding and cut a key sales forecast. Chipotle CEO Scott Boatwright said customers who are 25 to 35 years old are pulling back on visits. That customer age group accounts for roughly a quarter of Chipotle sales. For more, I'm joined now by Heather Haddon, who covers restaurants for the Journal. Heather, what's behind this drop off in numbers? What's going on here?