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Nestle will sell 8% stake in L鈥橭real
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Swiss food group Nestle is selling an 8 percent stake in L’Oreal to the French cosmetics firm for 6.5 billion euros (US$9 billion), loosening their 40-year partnership and allowing both firms to boost earnings per share.
However, Nestle yesterday said it remained committed to the maker of Garnier shampoo and Lancome creams for the “long haul,” dampening speculation it might sell its remaining 23 percent stake anytime soon.
“This transaction is a bit of a let down,” Liberum Capital analysts said in a note, referring to reports L’Oreal might buy a larger chunk of Nestle’s stake.
Nestle Chairman Peter Brabeck said the Swiss firm planned to stay a major investor in L’Oreal, which on Monday posted forecast-beating quarterly sales.
“I do not see this as a first step of leaving L’Oreal ... not at all,” he said. “We are in here for the long haul.”
The Swiss firm has been a major shareholder in L’Oreal since 1974, when L’Oreal heiress Liliane Bettencourt, now the world’s richest woman, sold around half her stake to Nestle for fear L’Oreal would be nationalized if Socialists came to power.
Under their pact, Nestle and Bettencourt promised not to sell their stakes without first offering them to the other.
With that agreement due to expire on April 29, speculation had been mounting the two firms would strike a deal before Nestle became free to sell its stake elsewhere.
L’Oreal said it would cancel all the shares it buys from Nestle, boosting its earnings per share by more than 5 percent.
But it will have to wait to buy more shares — if it is offered the opportunity — as French rules mean it cannot cancel more than 10 percent of its shares over an 18 month period.
“We’ll leave it at that for now,” L’Oreal Chief Executive Jean-Paul Agon said.
Nestle said it would use cash proceeds from the deal to buy back its shares, without disclosing details. But some analysts were disappointed it had not sold a bigger stake.
“This is not the mega-buyback that some speculated,” Kepler analysts said in a research note.
L’Oreal will pay for the deal with 3.4 billion euros in cash and by selling to Nestle its 50 percent stake in their Galderma dermatology venture for 3.1 billion euros, including about 500 million of debt.
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