Deal gives Nestlé direct stake in L’Oréal

Nestlé has acquired a 26.4 per cent direct stake in L’Oréal Keystone

The Swiss food giant, Nestlé, has acquired a 26.4 per cent direct stake in L’Oréal, following a deal to change the complex shareholding structure in the French cosmetics firm.

Nestlé and L’Oréal’s majority shareholder and founding family, the Bettencourts, on Tuesday agreed to simplify their joint holding in the cosmetics empire.

Under the terms of the pact, Gesparal – the holding company for Nestlé and the Bettencourt family – will merge with L’Oréal. The move means that Nestlé’s 49 per cent stake in Gesparal will become a 26.4 per cent direct holding in L’Oréal.

Gesparal currently owns 53.8 per cent of the capital and 71.7 per cent of voting rights in the French company, producer of cosmetics lines such as Maybelline and Lancôme.

Peter Brabeck, Nestlé’s chief executive officer, said the new pact would give “Nestlé more flexibility with regard to its strategic investment in the world’s leading cosmetics group”.

It also relieves the Vevey-based company of its potential obligation to buy the Bettencourt stake, worth about €12 billion (SFr19 billion) under the terms of the 1974 deal that created Gesparal.

The Bettencourts will remain the group’s largest shareholder (27.5 per cent).

Stability

L’Oréal welcomed the agreement, saying it would provide “renewed stability in the shareholder structure”.

Both sides have agreed to keep their holdings unchanged for five years. The pact also maps out ways for both shareholders to take control of L’Oréal or shed their stakes should they decide to do so.

L’Oréal’s profit has increased at least ten per cent annually over the past 19 years. The Paris-based company’s shares have more than trebled in the past decade, valuing L’Oréal at about €43 billion (SFr67 billion).

L’Oréal shareholders will be asked to approve the new agreement at a meeting on April 29.

swissinfo with agencies

Key facts

L’Oréal is currently valued at about €43 billion (SFr67 billion).
Half-year profit at Nestlé fell by 50.85 per cent to SFrSFr2.78 billion ($2 billion).
Nestlé is due to publish its full-year figures on February 28.