{"id":44164,"date":"2017-09-23T07:11:24","date_gmt":"2017-09-23T07:11:24","guid":{"rendered":"https:\/\/www.biphoo.com\/bipnews\/?p=44164"},"modified":"2017-09-23T07:11:24","modified_gmt":"2017-09-23T07:11:24","slug":"bettencourt-death-stirs-speculation-loreal-ownership","status":"publish","type":"post","link":"https:\/\/www.biphoo.com\/bipnews\/business\/bettencourt-death-stirs-speculation-loreal-ownership.html","title":{"rendered":"Bettencourt death stirs speculation about L’Oreal ownership"},"content":{"rendered":"

Bettencourt death stirs speculation about L’Oreal ownership<\/span><\/strong><\/span><\/h2>\n

Bettencourt death stirs speculation about L’Oreal ownership: The death of billionaire Liliane Bettencourt focused attention on Friday on how L\u2018Oreal\u2019s founding family and major shareholder Nestle (NESN.S) would manage their stakes in the world\u2019s biggest cosmetics firm.<\/span><\/p>\n

Bettencourt, listed by Forbes as the world\u2019s richest woman and heiress to the company started by her father, died at the age of 94, relatives said late on Thursday.<\/span><\/p>\n

Bettencourt\u2019s family owns 33 percent of L\u2018Oreal. Relatives including her daughter have managed the stake for several years since a court found she was suffering from a form of dementia.<\/span><\/p>\n

Nestle retains a 23 percent stake in the company.<\/span><\/p>\n

The death of the matriarch signals a potential shift in L\u2018Oreal\u2019s ownership. A 43-year-old agreement between the family and Nestle not to increase their stakes will expire after six months. There were no restrictions on reducing the stakes.<\/span><\/p>\n

\u201cSpeculation will now inevitably be re-ignited around Nestle\u2019s intentions toward its L\u2018Oreal stake,\u201d analysts at Jefferies said.<\/span><\/p>\n

\u201cThis holds out the prospect of L\u2018Oreal either buying in the stake, or perhaps even Nestle buying L\u2018Oreal outright.\u201d<\/span><\/p>\n

Hopes of change lifted L’Oreal’s shares 3 percent, making it the best performer on France’s benchmark CAC-40 index .FCHI.<\/span><\/p>\n

Bettencourt\u2019s only daughter Fran\u00e7oise Bettencourt-Meyers, who sits on L\u2018Oreal\u2019s board with her husband and one son, has said the family remained committed to L\u2018Oreal and its management.<\/span><\/p>\n

\u201cWhile the Bettencourt family has reasserted its commitment to the group, Nestle\u2019s position is more in doubt,\u201d said Gregoire Laverne, fund manager at Roche-Brune.<\/span><\/p>\n

Nestle\u2019s stake was worth 23 billion euros ($27.6 billion) before Friday\u2019s share price rise.<\/span><\/p>\n

Questions over Nestle\u2019s investment in L\u2018Oreal have intensified since June when activist shareholder Third Point disclosed a holding in Nestle and urged the Swiss group to dispose of an investment which is worth more than 10 percent of its own market value.<\/span><\/p>\n

Nestle has long said the stake was strategic and financial and its thinking has not changed, according to a source familiar with the matter.<\/span><\/p>\n

Nestle conveyed its condolences to the Bettencourt family on Friday. Beyond that, a spokeswoman said: \u201cThis is not the right time to make any further comment.\u201d<\/span><\/p>\n

L\u2018Oreal could not be reached for comment.<\/span><\/p>\n

TANGLED TAKEOVER TALK<\/span><\/strong><\/span><\/p>\n

Over the years there has been speculation that Nestle might try to acquire L\u2018Oreal outright, but that view is less common now that Nestle reduced its stake from 31 percent in 2014 and loosened the companies\u2019 ties by taking over the Galderma dermatology joint venture they shared.<\/span><\/p>\n

What is more, Nestle has pivoted toward nutrition and health while L\u2018Oreal is focused on beauty products.<\/span><\/p>\n

\u201cWe think a disposal in the medium\/long-term is more likely than a takeover,\u201d said analysts at UBS.<\/span><\/p>\n

Nestle\u2019s new chief executive Mark Schneider, who began his role at the turn of the year, will lay out his strategy next week at an investor meeting in London.<\/span><\/p>\n

L\u2018Oreal being controlled by two large shareholders has helped insulate it from unsolicited takeover bids like the one Unilever received this year which rippled through a packaged goods sector battling slowing growth.<\/span><\/p>\n

Any decline in the influence of the two big investors could make L\u2018Oreal more vulnerable, an industry banker said on Friday, but noted that its $117 billion market value limited any pool of suitors.<\/span><\/p>\n

L\u2018Oreal is seen as a willing and able buyer of Nestle\u2019s stake, and could use its 9 percent holding in drugmaker Sanofi (SASY.PA), worth about 9.5 billion euros, to fund it. Sanofi shares were up just under 1 percent.<\/span><\/p>\n

Jefferies estimates that if L\u2018Oreal bought back Nestle\u2019s entire stake in financial year 2018, it would end up with net debt 2.9 times EBITDA, which it called affordable.<\/span><\/p>\n

Earnings per share would rise 10 percent in 2018, and nearly 20 percent in 2019, they added.<\/span><\/p>\n

However, buying all the shares and cancelling them would create complexities.<\/span><\/p>\n

A reduced share count would lift the Bettencourts\u2019 ownership to 43 percent, a level that could force them to launch a takeover bid for the company under French rules, although there are exemptions.<\/span><\/p>\n

One way around that would be for Nestle to do an exchange offer, as suggested by Third Point, in which it would give its shareholders L\u2018Oreal shares in exchange for their Nestle ones.<\/span><\/p>\n

Third Point declined to comment on Friday.<\/span><\/p>\n

Source:http:\/\/www.reuters.com\/article\/us-l-oreal-bettencourt-stocks\/bettencourt-death-stirs-speculation-about-loreal-ownership-idUSKCN1BX0O0<\/span><\/p>\n

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