Nestlé and L’Oreal shares rose on Wednesday after the Swiss food group reduced its stake in the French beauty giant. Indeed, shares in both companies climbed more than 1%.
Nestlé has reduced its stake in L’Oreal to just over 20% by selling shares worth around $10 billion. The French luxury group’s shares hit a record high of 433.65 euros on Wednesday, their value more than tripling since Nestlé first sold an 8% stake in 2014. The stake Nestlé is selling will be bought by L’Oreal, bringing the Bettencourt Meyers family‘s stake to 34.7%.
The Swiss multinational had been a majority shareholder in L’Oréal group brands, such as Lancôme, since 1974. Indeed, at the time, Liliane Bettencourt had entrusted nearly half of her stake to Nestlé, for fear that her company would be nationalized in the event of the Socialists coming to power.
“Good deal for both” said the broker Jefferies. “This reduces Nestlé’s exposure to L’Oreal, which at about 16% of its market capitalization before the deal was becoming worrisome. It makes L’Oreal’s balance sheet a little more efficient, while keeping ownership in the family.”
According to a source familiar with the negotiations, Nestlé’s reduced stake is the result of two months of talks that involved the presidents of both companies. Nestlé wanted to retain a stake of more than 20%, allowing it to consolidate the investment on the books.
“When your financial investment is at historic highs, it’s not surprising that you monetize some of it, especially when there is no strategic partnership and it can continue to feed your equity story with solid cash returns,” Bernstein analysts said.
Nestlé nonetheless retains two members on L’Oreal’s board.
Read also > L’ORÉAL REPORTS 20% SALES GROWTH IN Q3
Featured photo : © L’Oréal
