It’s yet another step in reducing the investment that 48 years ago saw the formation of a partnership between two of the biggest multinational company on the planet: Nestlé and L’Oréal
Nestlé is about to reduce its stake in L’Oréal in a $10 Billion deal that allows the world’s biggest packaged-foods maker to capitalise on a rally in the French beauty company’s share price.
The Swiss giant – famous worldwide for Nescafé coffee and Purina pet food – announced it would sell 22.26 million L’Oréal shares back to the French company, paring its stake from 23% to about 20%. Nestlé will use the proceeds to help fund its own SFR20 Billion share-buyback programme.
Nestlé has been one of L’Oréal’s top shareholders for decades, an unusual alliance among two of the world’s biggest consumer goods companies. Nestlé’s position dates back to 1974, when France’s Bettencourt family, heirs of L’Oréal founder Eugène Schueller, sought an outside investor amid fears the French government could nationalize the business. Nestlé and the family held roughly equal stakes in L’Oréal until 2014 when L’Oréal bought back 8% of shares held by the Swiss company
For years Nestlé has faced pressure from analysts and investors to sell its shares in L’Oréal. The issue took on renewed significance in 2017, when billionaire activist investor Daniel Loeb’s hedge fund, Third Point LLC, took a stake in Nestlé and called on its then new chief executive, Mark Schneider, to sell L’Oréal shares, saying the position wasn’t strategic. Nestlé has repeatedly defended the investment, saying it has delivered good returns.
There has been no statement from the Nestlé side as to the reasons behind the decision to trim down, nor have there been comments as to what it planned for its sizeable remaining holding. For the time being, Nestlé will retain two seats on the board at L’Oréal.
Analysts and investors appeared to welcome the deal on Wednesday, with Nestlé shares trading 1.6% higher in morning trading in Europe and L’Oréal stock up 1.4%.