In what could be one of the largest cross-border acquisitions in the consumer products sector this year, Kimberly-Clark appears close to selling its global tissue business to Brazilian paper and pulp giant Suzano for approximately $3.5 billion, according to sources familiar with the negotiations.
The potential deal, first reported by the Wall Street Journal, would reshape the global tissue market landscape, creating a new powerhouse in the paper products industry. For Kimberly-Clark, this strategic divestiture allows the company to focus more intensely on its higher-margin personal care segments.
Having covered the consumer products sector for nearly two decades, I’ve observed Kimberly-Clark’s evolving strategy as it navigates shifting market dynamics. This move represents a significant pivot for the maker of Kleenex and Scott brands.
The transaction would transfer Kimberly-Clark’s professional and consumer tissue operations outside North America to Suzano, Brazil’s largest paper producer. This includes manufacturing facilities across Latin America, Europe, and parts of Asia, positioning Suzano as a formidable global competitor in the tissue segment.
Financial analysts at Morgan Stanley note that tissue products typically generate lower profit margins compared to Kimberly-Clark’s personal care lines, which include Huggies diapers and Depend adult incontinence products. The company’s tissue segment posted $6.5 billion in sales last year, representing about 31% of total revenue.
“This appears to be a classic case of portfolio optimization,” said Maria Fernandez, consumer goods analyst at Jefferies. “Kimberly-Clark is likely looking to redeploy capital toward higher-growth, higher-margin businesses while maintaining focus on core markets.”
For Suzano, already the world’s largest producer of eucalyptus pulp, this acquisition marks a significant downstream expansion into finished consumer products. The Brazilian company has been actively seeking growth opportunities beyond its traditional pulp business, where commodity price fluctuations have created earnings volatility.
The tissue paper market has faced significant challenges in recent years. Supply chain disruptions during the pandemic initially created unprecedented demand spikes, followed by normalization that left many manufacturers with excess capacity. Raw material costs, particularly pulp prices, have fluctuated dramatically, squeezing margins across the industry.
According to data from Euromonitor International, the global tissue and hygiene market is projected to reach $131 billion by 2027, growing at a modest annual rate of approximately 3.5%. This relatively slow growth environment has pushed industry players to pursue consolidation and efficiency improvements.
Kimberly-Clark’s CEO Mike Hsu has emphasized the company’s strategic focus on driving growth in personal care categories where the company holds stronger competitive positions. During the company’s most recent earnings call in April, Hsu noted the company’s intention to be “disciplined in our capital allocation” without specifically addressing divestiture plans.
The company has faced pressure from inflation and private-label competition in recent years. According to Nielsen data, private-label tissue products have gained approximately 2.5 percentage points of market share in North America since 2019, creating additional challenges for branded manufacturers.
If completed, the transaction would follow similar moves by consumer goods companies to streamline their portfolios. Last year, Unilever sold its tea business for $5 billion, while Procter & Gamble has focused investments on its most profitable brands while divesting secondary businesses.
The timing of this potential deal coincides with broader economic challenges facing consumer product companies. With inflation pressuring household budgets globally, many consumers have traded down to less expensive alternatives, particularly in paper products categories where brand loyalty tends to be lower.
Market analysts remain cautiously optimistic about the potential transaction. “This would be a win-win scenario if executed properly,” commented Robert Chen, consumer products specialist at Goldman Sachs. “Kimberly-Clark improves its business mix while Suzano gains immediate scale in finished goods with established brand equity.”
Neither Kimberly-Clark nor Suzano has officially confirmed the negotiations, though sources indicate the companies could announce an agreement within weeks, pending final details and regulatory approvals.
The deal would require regulatory clearance in multiple jurisdictions, with potential scrutiny in markets where the combined entity would hold significant market share. Antitrust concerns have delayed or derailed several cross-border transactions in recent years.
For investors, this potential transaction underscores the ongoing evolution of consumer products companies as they navigate changing market realities. The focus on high-growth, high-margin segments has become increasingly important in an era of cautious consumer spending and elevated input costs.
As this story develops, the market will be watching closely to see how both companies position themselves for future growth in an increasingly competitive global landscape.
