Nestlé cuts stake in L’Oréal with $ 10 billion sale

A Nestlé logo is pictured at Vers-chez-les-Blanc in Lausanne, Switzerland on August 20, 2020. REUTERS / Denis Balibouse

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PARIS, December 7 (Reuters) – Nestlé SA (NESN.S) announced on Tuesday that it would reduce its stake in L’Oréal (OREP.PA) to around 20% by reselling shares worth 8.9 billion euros ($ 10 billion) to the French cosmetics brand, on the move to reduce the weight of the beauty giant in its books for the first time in 7 years.

Nescafé’s stake in the beauty giant has come under scrutiny over the years, and the Swiss company has maintained its interest is both financial and strategic, even when the activist investor Third Point requested the divestiture in mid-2017. Since then, L’Oréal shares have more than doubled.

Seeking to reduce the weight of its stake in L’Oréal while maintaining a level above 20%, allowing it to consolidate the investment in the accounts, Nestlé approached L’Oréal two months ago, starting a wave of negotiations involving the presidents of the two companies, according to a source familiar with the negotiations.

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Following the deal, Nestlé said it would own 20.1% of L’Oréal, up from 23.3% previously. L’Oréal, for its part, would buy back shares representing 4% of its capital and cancel them no later than August 29.

L’Oréal, which pays € 400 per share, said the transaction would have an accretion effect on the company’s earnings per share of more than 4% in a full year. The beauty business pays with money and debt.

At the end of the transaction, which should be finalized in the coming days, the Bettencourt Meyers family will see its stake increase from 33.3% to 34.7%, but will not be required to launch a takeover bid. , as is normally required to pass holding thresholds above one third of the capital.

L’Oréal shares ended Tuesday up 3.96% to 424.8 euros while Nestlé gained 0.1% to 121.9 Swiss francs.

The packaged food maker also said its board of directors has decided to buy back 20 billion Swiss francs ($ 21.6 billion) of its stock between 2022 and 2024, adding that it would adjust that program to suit. he made important acquisitions.

Nestlé has announced that it will end its current share buyback plan by the end of the year, having repurchased shares for 12.7 billion Swiss francs, almost two-thirds of the program’s volume. .

L’Oréal stressed about four years ago that it was ready to buy back the 23% of Nestlé if the Swiss shareholder were to sell them.

Nestlé closed in October 2019 the sale of its skin health business for 10.2 billion Swiss francs, as the group was preparing to abandon the underperforming activities.

In 2014, Nestlé reduced its stake by 31%.

Centerview acted as senior advisor to L’Oréal for the transaction announced on Tuesday.

($ 1 = 0.8876 euros)

($ 1 = 0.9246 Swiss francs)

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Additional reporting by Praveen Paramasivam in Bangalore; Editing by Ramakrishnan M. and Cynthia Osterman

Our Standards: Thomson Reuters Trust Principles.

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