L’Oréal to buy 8 percent of its shares from Nestlé for $9b
French cosmetics firm L'Oréal is buying 8 percent of its shares from Swiss food group Nestlé for 6.5 billion euros ($9 billion), loosening their 40-year partnership and allowing both firms to boost earnings per share.
However, Nestlé said on Tuesday the deal was not the start of a full exit from L'Oréal, leaving some uncertainty over the future of its remaining 23 percent stake in the cosmetics maker.
"This transaction is a bit of a letdown," Liberum Capital analysts said in a note, referring to media reports that L'Oréal might buy a larger proportion or even all of Nestlé's stake.
"We assume speculation may continue regarding Nestlé's future plans. Sell to a third party? Sell more in the future to L'Oréal?"
"I do not see this as a first step of leaving L'Oréal ... not at all," Nestlé Chairman Peter Brabeck told reporters, describing the Swiss group's stake in L'Oréal as "strategic."
Nestlé became a L'Oréal shareholder in 1974.
Under their pact, Nestlé and L'Oréal heiress, Liliane Bettencourt, the world's richest woman, promised not to sell their stakes without first offering them to the other until April 29, 2014.
L'Oréal, which on Monday posted forecast-beating quarterly sales, will cancel all the shares it buys from Nestlé, 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 put limits on how regularly companies can cancel shares.
The deal will cut Nestlé's stake in L'Oréal to 23.29 percent from 29.4 percent while the Bettencourt Meyers family's stake in L'Oréal will increase from 30.6 percent to 33.31 percent.
L'Oréal CEO Jean-Paul Agon explained how the two consumer goods groups agreed on the 8 percent figure: "Nestlé's stake reduction had to allow it to remain a strategic shareholder ... while making sure that the Bettencourt family stayed below the 33.33 percent level." Beyond that level, the family would have to make an offer for the rest of L'Oréal's share capital.
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