Nestle, L'Oreal approves strategic transaction
Multinational food and beverage company Nestle and cosmetics and beauty company L'Oreal, on Tuesday announced that their respective Boards of Directors, in meetings held on Monday have approved by unanimous decision of their voting members a strategic transaction for both companies, under which L'Oreal will buy 48.5 million of its own shares (8 percent of its share capital) from Nestle.
This buyback will be financed partially through the disposal by L'Oreal to Nestle of its 50 percent stake in Swiss dermatology pharmaceuticals company Galderma (a 50/50 joint venture between L'Oreal and Nestle) for an enterprise value of 3.1 billion euros (2.6 billion euros of equity value), paid by Nestle in L'Oreal shares (21.2 million shares).
For the remainder, corresponding to 27.3 million L'Oreal shares held by Nestle, in cash for an amount of 3.4 billion euros.
The price per L'Oreal share retained for this transaction is the average of its closing prices between Monday (Nov 11, 2013) and Monday (Feb 10, 2014) 124.48 euros.
All the shares bought back by L'Oreal will be cancelled.
Following the transaction, Nestle's stake in L'Oreal will be reduced from 29.4 percent to 23.29 percent of the share capital and the Bettencourt Meyers family's stake in L'Oreal will increase from 30.6 percent to 33.31 percent.
In order to reflect the change of Nestle's stake in L'Oreal's governance, the number of Nestle representatives on L'Oreal's Board of Directors will be adjusted from 3 to 2 Directors, and the ownership ceiling provisions of the shareholders' agreement between Nestle and the Bettencourt Meyers family will apply to their respective new holdings.
The transaction will be accretive by more than 5 percent on L'Oreal's recurring earnings per share on a full year basis.
The buyback will be exclusively financed with L'Oreal's available cash and through the issuance of commercial paper.
It will not require the disposal of Sanofi shares held by L'Oreal.
The transaction is subject to customary conditions, including the prior consultation of Galderma's and L'Oreal's works councils and the clearance of the relevant antitrust authorities.
It is expected to close before the end of the first semester of 2014.
Peter Brabeck-Letmathe, Chairman of Nestle, said, "With this proposed acquisition of 50pc of Galderma, Nestle will pursue its strategic development in Nutrition, Health, and Wellness, by expanding its activities to medical skin treatments."
He said, "In this respect, Nestle will create a new centre of activities in this area, through a new entity: Nestle Skin Health SA. Galderma will be the foundation of this entity which will be run by Galderma's management."
Letmathe added, "As a wholly owned subsidiary of Nestle, Galderma will have all the required means for its development which will benefit to the company, its employees as well as all other stakeholders."
He noted, "Following the decrease of its stake in L'Oreal, Nestle will continue to support the development of L'Oreal as in the past 40 years."
"In this context, Nestle will continue to act in concert with the Bettencourt Meyers family and the existing agreements, adapted to the new situation, will remain in place," he said.
Jean-Paul Agon, Chairman and Chief Executive Officer of L'Oreal, said, "This transaction represents a very positive strategic move for L'Oreal, its employees and its shareholders."
Agon said, "L'Oreal will focus exclusively on its Cosmetics business and its "Beauty for all" mission, its universalisation strategy and its ambition to win one billion new consumers."
He noted, "L'Oreal will indeed benefit from a very significant and reinforced presence from the founding Bettencourt Meyers family, who will continue to fully support the company as it always did in the past. L'Oreal will also continue to benefit from the support of Nestle, which has always been a loyal and constructive shareholder."
"Lastly, all of L'Oreal's shareholders will benefit from this transaction with an accretive impact on the company's earnings, resulting from the buyback and subsequent cancellation of L'Oreal shares held by Nestle," he added.
(Posted on 11-02-2014)