Photographer: Marlene Awaad/Bloomberg

L’Oreal Advances on Prospects for Sale of Nestle’s Holding

Updated on
  • Liliane Bettencourt’s death sparks speculation change may come
  • Activist Dan Loeb has urged Nestle to sell 23 percent stake

L’Oreal SA shares surged the most in seven years on speculation that the death of the founding family’s matriarch, Liliane Bettencourt, could clear up the cosmetics maker’s ownership through a takeover or a buyback.

Bettencourt’s death raises questions about the stake Nestle SA has held in the French company for more than four decades. Her passing makes it more likely that the Swiss food giant will someday sell that 23 percent holding, worth about $28 billion, to L’Oreal, according to analysts. Another possibility is that L’Oreal attracts a takeover bid.

“Speculation will now inevitably be reignited around Nestle’s intentions towards its L’Oreal stake,” Martin Deboo, an analyst at Jefferies, said in a report. “Much will depend on the intentions of the Bettencourt enfants.”

L’Oreal climbed 2.4 percent to 180.85 euros at 1:47 p.m. in Paris after rising as much as 6.7 percent earlier.

Read more: details of the Nestle-Bettencourt pact

Nestle has faced calls to sell its stake in L’Oreal, most recently from activist shareholder Dan Loeb, who revealed a stake of about 1.3 percent in the Swiss food company in June. Nestle Chief Executive Officer Mark Schneider told Bloomberg Television in February that the L’Oreal stake is “highly strategic” and there is no short-term urgency to alter the relationship.

“It is with great sadness that we received the news of the passing away of Mrs. Liliane Bettencourt,” a Nestle spokeswoman said via email. “We express our most sincere condolences and deepest sympathy to Mrs. Bettencourt’s family and to all at L’Oreal at this difficult moment. As you can imagine, this is not the right time to make any further comment.”

Analysts consider two scenarios most probable: either the status quo, or L’Oreal buying back the stock from Nestle, possibly financing that through the sale of its 9.4 percent stake in French drugmaker Sanofi. 

Another possibility that UBS mentions is Nestle bidding for the rest of L’Oreal, though that would provoke more uproar from shareholders like Loeb and would be a reversal after the food company cut its stake in 2014. Under the terms of the shareholder pact, neither Nestle nor the Bettencourt family can buy more L’Oreal shares until six months after Liliane’s death.

As the pact ends, the Meyers Bettencourt family could also decide to sell their stake to L’Oreal, or the cosmetics maker could swap the Sanofi stake for the shares Nestle owns, Morgan Stanley analyst Richard Taylor wrote.

A judge in 2011 assigned Bettencourt’s daughter, Francoise Bettencourt Meyers, and two grandsons as guardians over her interests. She and her husband and one of her sons sit on L’Oreal’s board. The family’s 26 percent stake makes it L’Oreal’s largest shareholder.

“In this painful moment for us, I would like to reiterate, on behalf of our family, our entire commitment and loyalty to L’Oreal and to renew my confidence in its President Jean-Paul Agon and his teams worldwide,” Bettencourt Meyers said in a statement.

— With assistance by Lisa Pham, Corinne Gretler, and Mark Deen

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