L'Oreal SA, the world's largest cosmetics company, agreed to buy back 8 per cent of its stock for €6 billion ($8.2 billion) from Nestle SA, which has been an investor for 40 years.
The maker of Maybelline mascara will pay €3.4 billion in cash for 27.3 million shares held by Nestle, Paris-based L'Oreal said in a statement. L'Oreal will also sell its half of the companies' joint venture Galderma, a skincare pharmaceuticals company, to Vevey, Switzerland-based Nestle in exchange for 21.2 million shares, to which it assigned an equity value of €2.6 billion.
The rest of the L'Oreal stake is "strategic," Nestle Chairman Peter Brabeck-Letmathe said on Tuesday in Paris. The question of what to do with the holding has taxed Nestle since 2000, when Brabeck-Letmathe was CEO and proposed a stronger push into cosmetics. The board deemed that too ambitious and Brabeck-Letmathe decided instead to focus on nutrition and health, according to the company's official history.
"The eventual disposal of Nestle's entire holding in L'Oreal is the logical conclusion of this move," said James Edwardes Jones, an analyst at RBC Capital Markets in London. "That said, we wonder if there will be a slight feeling of anticlimax on the part of investors given that it looks as if the disposal will be done piecemeal and there is no clarity on the end game."
L'Oreal is paying €124.48 a share and all the stock purchased will be canceled. Nestle's stake will be reduced to 23.3 per cent from 29.4 per cent, and the Bettencourt family's stake will increase to 33.3 per cent from 30.6 per cent, according to the statement.