Nestle keen to trim its stake in L'Oreal
US$30b holding generates 10th of net income but no longer fits long-term plan
Nestle is exploring ways to reduce its US$30 billion stake in L'Oreal and has signalled its intentions to the management of the world's largest cosmetics maker, sources said.
Preparations had picked up ahead of April's expiry of restrictions on Nestle's stake imposed by a shareholder agreement with the Bettencourts, some sources said.
The Swiss firm is focusing on paring its investment because cosmetics do not fit its long-term nutrition and health strategy, the investment ties up capital and has already generated sizable returns, one source said.
Nestle, already sitting on more than US$6 billion in cash and short-term investments, did not have an immediate plan to redeploy proceeds from a sale, two sources said. The key for Nestle was selling shares at the right price, one source said.
The Swiss food company has several options on how to exit. It could sell shares to L'Oreal, the Bettencourt family or the public, or a combination of those three, sources said.
L'Oreal could also buy shares and take them out of the market, which its shareholders would like because it would increase the value of their existing holdings, some sources said. Complicating any discussions are the different interests of the owners, which include France's richest person and two of Europe's biggest consumer companies.
A spokesman for Nestle declined to comment, referring only to the company's previous statement that the future of Nestle's participation in L'Oreal was an important topic for the group and that the board was addressing the matter with "great attention."
Nestle bought a stake in L'Oreal in 1974 from the Bettencourts. The holding generates about a 10th of Nestle's net income.
