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Kimberly-Clark considers spinning off health care business

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DALLAS—Kimberly-Clark Corp. officials are reviewing a possible tax-free spinoff of its health care business, making it a stand-alone operation.

The new company would have about $1.6 billion in revenues, 16,000 employees and be headquartered in Roswell, Ga., the firm said.

While the health care business has been part of Kimberly-Clark since 1970, Chairman and CEO Thomas J. Falk said, “its strategic fit and growth priorities have changed over time, and we now think that pursuing a spinoff makes sense for our shareholders.”

A spinoff would open the door for K-C Health Care to pursue its own opportunities, he said, and it would allow Kimberly-Clark to focus on the firm's Consumer and K-C Professional brands.

K-C Health Care accounted for more than 7 percent of Kimberly-Clark's $21 billion in revenues in 2013. Its third quarter operating profit came in at about $70 million.

Robert E. Abernathy—group president-Europe, global nonwovens, continuous improvement and sustainability—will become CEO of the new company if K-C Health Care becomes a separate entity.

Falk said Abernathy is a seasoned executive “with a long track record of success, and I'm confident he will be a terrific leader of the new company.”

Abernathy joined Kimberly-Clark in 1982 and has held senior management positions throughout the company, including overall responsibility for K-C Health Care from 1997 to 2004.

Joanne B. Bauer will continue to serve as president of the business and work closely on separation planning with Abernathy, according to the firm. She'll retire when the spinoff is completed, it said.

Kimberly-Clark's management team will analyze the potential spinoff and expects to make a final recommendation to the firm's board of directors in the next several months, the company said. If creation of the stand-alone business is approved, it's likely the transaction will be completed by the end of 2014's third quarter, it said.

K-C Health Care produces a variety of medical devices and products, a good portion of them made from synthetic rubber, including silicone, polyurethane and nitrile, a spokesman said. Its broad range of offerings include catheters, feeding tubes and gloves. It focuses heavily on pain management, respiratory and digestive health products.

About 70 percent of its $1.6 billion in sales in 2012 were in North America with most of the remainder in Europe and Asia.

A large majority of its 16,000 employees work at low-cost manufacturing plants in Latin America and Asia.

Kimberly-Clark said it's likely the spinoff would be in the form of a tax-free distribution of the new company's common stock to Kimberly-Clark shareholders.