Nestlé wants to dial down L’Oréal participation

Talks have started

The reason Nestlé would want to lower its number of L’Oréal shares is that the company does not fit the long-term plans, which are focused on food and health. Several sources state that Nestlé has already contacted L’Oréal’s board, while it has also sought advice with several banks. Even if it wanted to get rid of (a part of) its shares, the company’s size means it might take several years before it can actually complete the shift.

Before anyone can even think about snapping up Nestlé’s shares in L’Oréal, a few things still need to be taken care of: Nestlé has to reach an agreement with L’Oréal and the Bettencourt family, which owns 31 % of shares. A few other, smaller, shareholders could also intervene and impede a fluent handling of the situation. One of these smaller shareholders is the richest man in France, one of the shareholders who might want to defend his own personal interests.

Several options

Nestlé has a few options to get rid of (a part of) its stock: it can publicly trade the stock, either to the general audience or to the Bettencourt family itself, or sell the shares to L’Oréal itself – which then can take them off the market. That move would boost the value of the remaining shares, which may sound enticing to the remaining shareholders. For the moment, Nestlé has to offer the shares to the Bettencourt family, but that clause would disappear after 29 April.

Nestlé bought the shares in 1974 from the Bettencourt family, which is Eugène Schueller’s family, the man who founded L’Oréal. Nestlé gets some 10 % of its net profit from L’Oréal’s shares.