L'Oréal shares rose on Wednesday after Nestlé said that it plans to cut its stake in the French cosmetics giant to about 20%, by selling shares worth €8.9 billion.
Following the deal, Nestle said it would own 20.1% of L'Oréal, down from 23.3% previously.
L'Oréal, meanwhile, would buy back shares representing 4% of its capital and cancel them at the latest on August. 29.
L'Oreal, which is paying €400 per share, said the deal will have an accretive effect on the company's earnings per share of more than 4% in a full year. The cosmetics company is paying with cash and debt.
Bettencourt Meyers Stake Increases
As a result of the transaction, which is expected to close in the coming days, the Bettencourt Meyers family, will see their stake rise to 34.7% from 33.3%, but will not be required to launch a takeover offer, as normally required for passing ownership thresholds above one-third of the capital.
“This transaction with Nestlé is in the interest of the company and all of its shareholders," commented Jean-Paul Agon, chairman of the board of directors at L'Oréal. "It constitutes a new strategic milestone in reinforcing the shareholder stability of L’Oréal around the Bettencourt Meyers founding family and Nestlé.”
Nestlé Share Buyback Scheme
Separately, Nestlé has said that it plans to replace its existing share buyback programme with a new plan which is set to commence at the start of January.
Under this new programme, Nestlé plans to repurchase CHF 20 billion of its shares over the period 2022 to 2024, including buying around CHF 10 billion of shares in the first twelve months.
In October, L'Oréal reported a 13.1% increase in sales in its third quarter, boosted by sustained growth in China. Nestlé recently raised its full-year guidance, following a strong first nine months of the year.