Nestle Cuts Its Stake In L’Oreal To 20 Pct
Consumer packaged goods ( CPG) giant, Nestle, is reducing its stake in L’Oreal to 20.1% by selling shares worth $10 billion.
The company’s stake in the beauty giant has been subject to scrutiny over the years. However, the company argued that its interest in L’Oreal was both strategic and financially advantageous. In mid-2017, activist investor Third Point pressured Nestle to dispose its stake, which the company refused.
Nestle’s decision to hold onto its stake in L’Oreal paid off. Since 2017, the beauty giant’s shares have more than doubled.
Even though Nestle is reducing its stake in L’Oreal, it will still maintain its investment in the company above the 20% level, down from 23.3% before. The move comes two months after Nestle approached L’Oreal about its plans, which led to negotiations between the chairmen of the two companies.
The cash and debt deal will result in L’Oreal buying back shares at $453 per unit, representing 4% of its capital, according to Reuters. The company expects the deal to yield earnings per share of more than 4% in a full year.
Four years ago, L’Oreal had expressed its interest in buying Nestle’s 23% stake if the company was willing to sell it.
In October 2019, Nestle announced that it was selling its skin health business for $11.5 billion to ditch its underperforming business units.
Originally published at https://retailbum.com on December 8, 2021.
