Johnson & Johnson said on Friday that it would break itself into two publicly traded companies, in the latest instance of corporate giants shrinking themselves to please shareholders.
The 135-year-old company, which employs more than 136,000 people, announced that it planned to spin off its consumer-products division — home to Tylenol, Band-Aid, Neutrogena beauty products and more — into a separate business.
That would leave J.&J. with its pharmaceutical and medical devices division, which includes its coronavirus vaccine manufacturing and boasts faster-growing sales and higher margins.
Even as stand-alone businesses, the J.&J. companies will be enormous. The medical division is expected to report $77 billion in revenue this year. And the consumer operations — which trace their roots to the company’s founding in 1886 as a maker of surgical dressings — are predicted to bring in $15 billion in sales.
It is a route that others in the health care industry have followed. In 2014, Merck sold its consumer business to Bayer for $14.2 billion. And in 2019, Pfizer and GlaxoSmithKline agreed to merge their consumer divisions to focus on higher-growth pharmaceutical operations, with the companies planning to spin off that joint venture next year.
J.&J. said it planned to complete the separation, which is expected to be tax-free to its shareholders, in 18 to 24 months.
“Throughout our storied history, Johnson & Johnson has demonstrated that we can deliver results that benefit all our stakeholders, and we must continually be evolving our business to provide value today, tomorrow and in the decades ahead,” Alex Gorsky, the outgoing chief executive, said in a statement.
J.&J. had previously announced that Joaquin Duato would become chief executive in January, while Mr. Gorsky would continue as executive chairman.
The decision comes days after General Electric, another icon of corporate America, revealed a plan to break itself into three companies. And it was announced hours after Toshiba, a stalwart of Japanese industry, said it, too, would split itself into three.
Before, the corporate world believed that bigger was better, with diverse product offerings making for stronger and more predictable earnings. J.&.J. itself embarked on such deals, having bought consumer brands like Listerine from Pfizer for $16.6 billion over a decade ago.
But the leaders of diversified companies are increasingly feeling pressure to simplify their sometimes sprawling business empires, in hopes of sharpening their focus and lifting their stock prices. Activist hedge funds and others have argued over the past decade that conglomerates are too weighed down by bureaucracy, and that the promise of fast-growing divisions is often overshadowed by results from slower-growth ones.
The biggest technology companies, by contrast, have expanded into new businesses and been rewarded by investors, but they are also attracting increased regulatory scrutiny amid concern that their size harms competition.
J.&J. has grappled with thousands of legal claims that its talc-based products may have caused cancer. J.&J. discontinued sales of talc-based baby powder in North America last year, though it has said that it is safe. In October, a division that the company had created to manage those lawsuits filed for bankruptcy protection.
The company’s share price rose about 1.4 percent in early trading on Friday.