Latest News by Industry
• Nestle will reduce its stake to 20.1% from 23.3%
• The packaged foods maker will sell 22.26 million L’Oréal shares back to the French company
Nestle will reduce its stake in L’Oreal in a deal worth $10 billion, selling it back to the French cosmetic giant to capitalize on its market rally.
The packaged foods maker will pare its stake to 20.1% from 23.3% at the end of last year by selling 22.26 million L’Oréal shares back to the French company. Each share is priced at $452.97.
Wall Street Journal reported that Nestlé will use the proceeds to help fund its own 20 billion Swiss francs, approximately $21.6 billion, share-buyback program.
This is the first time since 2014, that Nestle has reduced its stake in the shampoos and lipsticks manufacturer. In 2014, the former disposed off a 6% holding for $6.8 billion.
Nestle has been L’Oreal’s top shareholder since 1974 when the latter was trying to avoid nationalization. Recently, Nestle has faced pressure from investors including Third Point LLC’s Daniel Loeb to sell its stake in the French company as they believe it wasn’t strategic.
Nestle will retain two seats on the board at L’Oreal. This is L’Oreal’s largest-ever transaction. It plans to cancel the repurchased shares, effectively raising the earnings per share.
The transaction will raise the stake of the Bettencourt Meyers family, which is the other main investor in L’Oreal, to 34.7% from 33.3%, according to a statement from L’Oreal.
Investors welcomed the news as Nestle’s shares rode higher 1.6% higher in morning trading in Europe and L’Oréal stock was up 1.4%.
With inputs from Wall Street Journal and Bloomberg
Picture Credits: CGTN