Nestlé Reducing Stake in L’Oréal

PARIS — Nestlé said late Tuesday night that it is reducing its stake in L’Oréal to 20.1 percent from 23.2 percent.

The Swiss food and drink conglomerate, which is the French beauty giant’s second-largest shareholder after the Bettencourt Meyers family, said in a statement it has agreed to sell 22.26 million of L’Oréal shares to L’Oréal for a per-share price of 400 euros.

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That makes the total price to be paid to Nestlé equal to 8.904 billion euros, or 9.28 billion Swiss francs.

L’Oréal will then by Aug. 29, 2022, cancel the repurchased shares, which represent 4 percent of its capital, as part of its share buyback program, the company’s board approved Tuesday. The share buyback is to be financed by L’Oréal’s available cash and new debt.

Once the transaction closes, Nestlé will own 20.1 percent of L’Oréal, versus the 23.2 percent stake it holds today.

“This transaction with Nestlé is in the interest of the company and all of its shareholders,” said Jean-Paul Agon, chairman of L’Oréal’s board, in a statement released minutes after Nestlé’s. “It constitutes a new strategic milestone in reinforcing the shareholder stability of L’Oréal around the Bettencourt Meyers founding family and Nestlé.”

“We are delighted to continue the development of L’Oréal with the support of the Bettencourt Meyers family and Nestlé,” said Nicolas Hieronimus, chief executive officer of L’Oréal.

The deal’s accretive affect will impact other L’Oréal stakeholders, including the Bettencourt Meyers family, whose stake in the group will increase to 34.7 percent from 33.3 percent.

France’s stock market regulator, the Autorité des Marchés Financiers, has granted a waiver to the Bettencourt Meyers family regarding the requirement of filing a mandatory public offering after having crossed the threshold of one-third of the capital and the voting rights of a company.

L’Oréal explained the transaction “will help optimize [the company’s] balance sheet benefitting from excellent financing conditions, while retaining a significant financial flexibility to ensure the group’s future development.”

L’Oréal said the operation will have an incremental effect on the company’s earnings per share of more than 4 percent in a full year.

Nestlé said it “remains fully supportive of the company’s value creation strategy,” and that it will keep its two seats on L’Oréal’s board.

In March 2020, Nestlé revealed it was keeping its options open regarding its stake in L’Oréal. At the time, in its annual review, it wrote: “The board continuously monitors the returns and strategic options for our financial investment in L’Oréal.”

In September 2018, Nestlé said it was exploring options for its stake in L’Oréal.

As part of a shareholder agreement with the Bettencourt family, Nestlé has been free to sell its shares in L’Oréal since April 2014. In February 2018, Nestlé said its board decided not to renew its shareholder agreement.

“We do not intend to increase our stake in L’Oréal and are committed to maintaining our constructive relationship with the Bettencourt family,” it explained in a statement at the time.

Nestlé has cleared the beauty category from its own portfolio. In October 2019, the group sold its Skin Health business, which was renamed Galderma, to a consortium including EQT, PSP Investments and a subsidiary of the Abu Dhabi Investment Authority in a deal worth 10.2 billion Swiss francs, or $11.03 billion.

For more, see:

Nestlé to Buy The Bountiful Company Core Brands for $5.75 Billion

Nestlé Continues Monitoring Strategic Options for L’Oréal

Nestlé Explores Options for Skin Health Division

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