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L’Oreal CEO says cosmetics maker ready to buy Nestle’s stake

L’Oreal has the resources to repurchase the holding, worth about €22b, Agon said

Gulf News

Geneva/Paris: L’Oreal SA Chief Executive Officer Jean-Paul Agon said the French cosmetics company is ready to buy Nestle SA’s 23 per cent stake as some investors pressure the Swiss food maker to offload it.

L’Oreal has the resources to repurchase the holding, worth about €22 billion (Dh99 billion, $27 billion), Agon said at a presentation Friday. The cosmetics company probably would sell its holding in French drugmaker Sanofi to help finance any such deal, he said in a Bloomberg Television interview.

“It’s in their hands,” the CEO said. “If Nestle one day wants to sell, we are ready.”

While Agon has made similar comments before, he hasn’t spoken on the matter since the death of Liliane Bettencourt, the matriarch of L’Oreal’s founding family, in September. L’Oreal has €1.8 billion in cash and owns a 9 per cent stake in Sanofi.

“If it was not enough, we got love letters from lots of great banks telling us they would love to lend us money,” Agon said.

L’Oreal shares rose as much as 2.9 per cent Friday, also buoyed faster-than-expected sales growth.

Activist shareholder Dan Loeb has been pressuring Nestle to sell the stake. Nestle CEO Mark Schneider told Bloomberg TV last year that the holding is “highly strategic” and there is no short-term urgency to alter the relationship. A spokeswoman for the Vevey, Switzerland-based company declined to comment Friday.

“We consider this the most likely resolution of Nestle’s holding position, though timing is of course far from clear,” wrote Alicia Forry, an analyst at Investec, who estimates L’Oreal could boost its earnings per share by 10 per cent through such a purchase.

L’Oreal said late Thursday that fourth-quarter revenue rose 5.5 per cent on a comparable basis, led by luxury products for the sixth consecutive quarter. That was above analysts’ estimate of 4.9 per cent. The company’s operating margin widened to a record 18 per cent last year.

The Financial Times reported Agon’s comments earlier. Still, some analysts don’t see a deal anytime soon.

“We do not think Nestle are sellers,” wrote Sarah Barr and Martin Deboo, analysts at Jefferies.