By Dhirendra Tripathi
Investing.com – Stocks of L’Oreal (PA:OREP) and Nestle (SIX:NESN) were both trading higher in European markets as the two reached a deal that will see the former repurchase its own shares held by the Swiss company.
L’Oreal stock was 1.4% higher in Paris while Nestle was up 1.7% in Zurich.
Propsects of improved per share earnings -- the French beauty firm will cancel the stocks it buys back by August 29 next year -- were boosting L'Oreal stock. EPS will rise by more than 4% on a full-year basis, a L'Oreal statement said. Nestle, meanwhile, will get 8.9 billion euro ($10 billion) from the sale.
The transaction is part of L’Oreal’s share repurchase program and will reduce Nestle’s stake in it to just over 20.1% from 23.3%, L’Oreal said.
About 22 million shares or 4% of L’Oreal’s capital will exchange hands at 400 euro apiece.
The strike price at which the deal is happening is 7% lower than the stock’s prevailing level.
The share buyback will be financed through a mix of cash-in-hand and new debt, according to L’Oreal.
L’Oreal’s Bettencourt Meyers family will see their stake rise to 34.7% from 33.3%, and as approved by the regulators, will not need to launch a takeover offer, as is normally required when one entity's ownership rises above one-third of capital.