PARIS Feb 10 Shares in L'Oreal climbed as much
as 5 percent on Monday after reports that food maker Nestle
was studying options to reduce its 30 percent stake in
the cosmetics group.
Investors were betting that L'Oreal could buy the stake from
Nestle over time, thus boosting earnings per share.
Other options for Nestle's exit include selling the shares
to the Bettencourt family, which is the largest shareholder in
L'Oreal with 30.9 percent; selling on the public market; or
selling to a third party.
The Swiss foods group is under pressure to make its
intentions clear towards L'Oreal, its partner of 40 years, when
the shareholder pact that binds them offers an exit in April at
the end of a lock-up period.
Nestle, which owns brands such as Kit Kat chocolate bars and
Alpo pet food, owns a 29.5 percent stake in L'Oreal and the
expiry of a 10-year right of first refusal agreement with the
Bettencourt family in April should make it easier for Nestle to
sell, though it has said it has no urgent need to do so.
Bloomberg reported on Friday that Nestle has told L'Oreal of
its intentions and the two companies have discussed the issue
with banks, though no decision over the possible timing of any
sale, which could take years, has been made.
Analyst Andrew Wood at brokerage Bernstein wrote in a
research note that he was not fully convinced that Nestle would
sell its stake, since such speculation has had been around for
years, but noted "it would clearly have implications for both
"By some margin, we believe option selling the stake
directly to L'Oreal remains the most likely," said Wood.
Shares in Sanofi also rose as investors bet that
the shift at Nestle could lead L'Oreal to sell its 9 percent
stake in Sanofi, which is worth $12 billion, to finance buying
back its shares from Nestle.
Sanofi Chief Executive told Reuters in a recent interview
that the French drug maker was a willing buyer of the stake,
calling the potential deal "very accretive".
L'Oreal shares were up 4.9 percent at 129.6 euros by 1003
GMT, having risen as high as 129.95 euros, their highest since
Sanofi shares were up 1.4 percent.
(Reporting by Leila Abboud; Editing by David Holmes)