Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Nestle sale of L'Oreal shares pleases investors on both sides

Stock MarketsDec 08, 2021 07:42AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: A cosmetic display of French cosmetics group L'Oreal is seen during the inauguration of the commercial zone at the Nice international airport Terminal 1 in Nice, France, June 10, 2016. REUTERS/Eric Gaillard 2/2

By Gwénaëlle Barzic and Silvia Aloisi

PARIS (Reuters) -Shares in Nestle and L'Oreal rose on Wednesday after the Swiss food group trimmed its stake in the French beauty giant, a deal that pleases investors on both sides while keeping ties between the two companies broadly intact - at least for now.

The Nescafe maker has been a major shareholder in the owner of brands like Lancome since 1974, when L'Oreal heiress Liliane Bettencourt entrusted nearly half her stake to Nestle for fear it would be nationalised if Socialists came to power.

The presence of Nestle, which is cutting its stake to just over 20% from 23% by selling shares worth about $10 billion, alongside the L'Oreal founding family helped insulate the French group from unsolicited takeover bids.

For Nestle, it has proved a great investment. L'Oreal shares yielded a total return of 11% on an annualised basis since then, excluding dividends, according to analysts at Vontobel.

They hit a record high of 433.65 euros on Wednesday, having more than trebled in value since Nestle first sold an 8% holding in 2014.

The stake Nestle is selling will be bought back by L'Oreal, increasing the Bettencourt Meyers family holding to 34.7% from around 33%.

"Good business for both," said broker Jefferies (NYSE:JEF). "It reduces Nestle's exposure to L'Oreal, which at about 16% of its market cap pre-transaction was becoming troublingly high. It makes L'Oreal's balance sheet somewhat more efficient, while keeping ownership 'in the family'."

Shares in both companies opened more than 1% higher on Wednesday.

" BEST (NYSE:BEST) OF BOTH WORLDS"

Nestle's holding in L'Oreal has been the subject of intense scrutiny over the years as Chief Executive Mark Schneider pivoted the company towards nutrition and wellness, and activist investor Third Point in 2017 urged the Swiss group to sell out.

According to a source with knowledge of the negotiations, Tuesday's announcement was the result of two months of talks that involved the chairmen of both companies. Nestle was keen to maintain a holding above 20%, allowing it to consolidate the investment on accounts.

The source said Nestle was unlikely to sell more of its stake for now, unless it decided to go for a big acquisition.

"When your financial investment reaches all-time highs, it is not surprising that you monetise some of it, especially when there is no strategic partnership and when it can continue to fuel your equity story of strong cash returns," analysts at Bernstein said.

Nestle, which retains two members on L'Oreal's board, "can keep doing this several times in the next decade," they said.

A spokesman for Nestle said the stake sale left the company in a "best of both worlds" situation.

"On the one hand, we monetise around 9.3 billion Swiss francs (8.9 billion euros). On the other hand, it keeps us involved with a very successful company," he said.

Centerview acted as lead adviser to L'Oreal while Credit Suisse (SIX:CSGN) advised Nestle.

($1 = 0.8859 euros)

Nestle sale of L'Oreal shares pleases investors on both sides
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email