Nestle keen to trim its stake in L'Oreal

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.

Nestle had raised the issue with L'Oreal at the highest levels and both sides had discussed the matter with banks, they said. Any move to gradually reduce the 29 per cent stake could take years, several sources said, citing the size of the holding and the close, complex nature of the relationship between the companies and the Bettencourt family, which owns 31 per cent of L'Oreal.

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.