By Jonathan Stempel
(Reuters) -Texas Attorney General Ken Paxton on Thursday asked a state judge to block Kenvue from paying a nearly $400 million shareholder dividend this month, after suing the drugmaker
for allegedly concealing risks to children from the use of Tylenol by pregnant women.
The October 28 lawsuit against Kenvue and its former parent Johnson & Johnson, which made Tylenol for six decades, was filed five weeks after Republican President Donald Trump repeated the unproven claim that using Tylenol during pregnancy can cause autism.
Paxton, also a Republican, said Kenvue must conserve cash because it faces billions of dollars of potential damages related both to Tylenol and to international lawsuits claiming that baby powder containing talc causes cancer.
He said paying the scheduled November 26 dividend, which according to a regulatory filing would total about $398 million, would violate a Texas law against fraudulent transfers.
"Kenvue very well may be insolvent because of its own reckless actions," Paxton said. "It is hard to think of a more classic example of a fraudulent transfer than this."
Paxton's request for an injunction against the dividend payout throws a new wrinkle into Kimberly-Clark's planned $40 billion takeover of Kenvue.
The merger was announced on Monday. If completed it would let the maker of Kleenex and Huggies diapers expand into higher-margin categories such as skin care and pain relief.
Band-Aid, Johnson's Baby shampoo, Listerine and Neutrogena are some of Kenvue's brands.
Many investors were cool to the merger, with Kimberly-Clark shares down nearly 15% on Monday, in part reflecting concern that Tylenol litigation could last years and absorbing the liabilities could be expensive.
Kenvue shares closed Wednesday nearly 23% below the takeover price, a sign some investors believe the merger might not be completed on the original terms.
Kimberly-Clark is not a defendant in Paxton's lawsuit.
Paxton filed his lawsuit in Panola County, Texas, which gave Trump 83% of the vote in the presidential election. The attorney general is seeking a U.S. Senate seat in 2026.
(Reporting by Jonathan Stempel in New York; Editing by Leslie Adler)
