The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Robert Cyran

NEW YORK, Nov 3 (Reuters Breakingviews) - Kimberly-Clark KMB.O is trusting that science will win out over vibes. The maker of Kleenex and Huggies diapers said Monday that it would buy over-the-counter drugmaker and consumer goods company Kenvue KVUE.N for $48.7 billion including debt. Its shares promptly slid by around 13%. The deal is an opportunistic bet that concerns stemming from President Donald Trump’s claims linking the seller’s marquee painkiller Tylenol to autism will wither in the face of evidence.

Kenvue has had a tough time since spinning off from previous owner Johnson & Johnson JNJ.N in 2023. Growth has been slower than hoped, while fears rise over possible losses from a series of lawsuits, especially after Trump’s comments in September. So far, courts have agreed with studies showing no credible link between Tylenol’s active ingredient, acetaminophen, and autism. Even if Kenvue keeps racking up victories, the uproar could deal lasting damage to its brand. Put it together, and shares had fallen by a third this year.

Enter Kimberly-Clark, offering $21.01 a share mostly in stock, with a bit of cash thrown in. That’s a whopping 46% premium to where Kenvue’s shares closed on Friday, even if it’s slightly below the $22 at which J&J floated part of the company in 2023.

The buyer’s boss, Michael Hsu, is enthusiastic about picking up well-known staple brands like mouthwash Listerine and bandage Band-Aid. Consumer goods this long-lived and practically synonymous with their category don’t come to market often. Moreover, analysts think Kenvue will earn about $3.2 billion before tax next year. Add $1.9 billion of promised profit-boosting cost-cuts, tax it at the statutory corporate rate, and that’s just over $4 billion of post-tax profit or over an 8% return on investment. If the combined company can grow its top-line faster by creating toilet paper and tissues that blend “molecules and paper” – as executives put it on a call with investors – then the return could be higher. That’s a decent outlook for a boring but safe consumer goods company that therefore sports a relatively low cost of capital of about 7%, according to Morningstar analysts.

Kimberly-Clark investors' negative reaction might be a result of the still-high premium of nearly $13 billion, doled out by a bidder who’s less of a natural fit with Kenvue than, say, consumer giant Procter & Gamble PG.N. Granted, perhaps the overlaps between those two companies – in diapers, tampons and skin care – would pose a regulatory headache.

Still, the relatively limited overlap in this deal means expected cost cuts might be easier to promise than deliver. And there’s still the fear of litigation: just last week, the state of Texas sued Kenvue over claimed autism links. Like a mindful shopper spying a discount, though, Kimberly-Clark looks to simply be following the M&A numbers.

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CONTEXT NEWS

Consumer hygiene products maker Kimberly-Clark said on November 3 it had agreed to buy Tylenol owner Kenvue in a deal worth $48.7 billion including debt. Each share of Kenvue will receive $3.50 in cash and 0.14625 shares of Kimberly-Clark under the deal, implying a total value of $21.01 per share, based on closing prices prior to the announcement. Kenvue investors are in line to own 46% of the combined company.

Kenvue was spun off from Johnson & Johnson in 2023. U.S. President Donald Trump said in September in a press conference that taking Tylenol can be “associated with a very increased risk of autism” and that “you shouldn’t take it during the entire pregnancy.” Large clinical trials do not support these claims.

(Editing by Jonathan Guilford; Production by Pranav Kiran)

((For previous columns by the author, Reuters customers can click on CYRAN/robert.cyran@thomsonreuters.com; Reuters Messaging: robert.cyran.thomsonreuters.com@reuters.net))