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L’Oreal ready to buy Nestle stake in cosmetics leader
February 10, 2018
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PARIS: L’Oreal on Friday underscored its readiness to buy Nestle’s 23 per cent stake in the world’s biggest cosmetics firm were its Swiss shareholder to sell, saying it had access to cash and funding at its disposal.

L’Oreal said it could finance a purchase of the holding, now worth around 22.3 billion euros ($27.4 billion), with cash, by selling its stake in French drugmaker group Sanofi or through borrowing if needed.

“If Nestle one day wants to sell, we are ready,” Chairman and Chief Executive Jean-Paul Agon told a news conference, after L’Oreal released slightly better-than-expected fourth-quarter earnings.

The death of L’Oreal heiress Liliane Bettencourt last September set the clock ticking on the end of 44-year-old shareholder pact between the French company’s founding family and Nestle.

The agreement prevented the Bettencourts, which have 33 per cent of L’Oreal, and the Swiss food group from raising their holdings. It is now set to expire in mid-March, stirring speculation over the shareholders’ relationship and whether Nestle might sell out or even contemplate a takeover.

Nestle had previously been at liberty to whittle down its L’Oreal holding, however, and has yet to budge, in spite of pressure from activist investor Daniel Loeb, founder of hedge fund Third Point. Loeb has pushed for a sale among demands for the Swiss firm to speed up a strategy overhaul.

“We have 1.8 billion euros in cash, we have the Sanofi stake. We are also a very serious and loyal and active shareholder in Sanofi, but in case we will be ready and I’m sure if it was not enough, we have many love letters from banks that have said that they would love to lend us some money,” Agon said.

Nestle and Sanofi declined to comment. Shares in L’Oreal, maker of Garnier shampoo and cosmetics labels like Lancome, were up 1.3 per cent at 1413 GMT, among the top gainers on France’s blue-chip CAC-40 index. Nestle shares were up 0.6 per cent, while Sanofi was 0.9 per cent lower.

Nestle has so far given no signs it could sell out of L’Oreal.

“Our approach to this investment is currently not changing,” Nestle CEO Mark Schneider told investors in September.

The L’Oreal stake is worth about 10 per cent of Nestle’s market capitalisation and has contributed to its earnings, but some investors, including Loeb, think that money could be put to better use.

Loeb has praised Nestle’s chief for other recent steps such as buying back stock, buying and selling some assets and bringing new directors onto the board.


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