By Yifan Wang
Nestlé S.A. has agreed to cut its stake in L’Oréal S.A. by selling $10.0 billion worth of shares back to the French cosmetics maker, the latest development toward a long-speculated decoupling of two of the world’s biggest consumer-goods companies.
Under the agreement, Nestlé /zigman2/quotes/208115528/delayed CH:NESN +0.31% will sell 22.26 million of L’Oréal /zigman2/quotes/201943586/delayed XE:LOR -0.40% shares for a total consideration of 8.9 billion euros, the two companies said. L’Oréal will fund the deal with cash and debt, and will cancel the repurchased shares.
The deal will bring down Nestlé’s stake in L’Oréal to 20.1% from the previous 23.3% level, marking the Swiss company’s first time to reduce its shareholding in L’Oréal since 2014.
Analysts have for years anticipated a potential eventual exit by Nestle from L’Oréal. In 2017, the Nescafé maker’s relationship with L’Oréal came under particular scrutiny, as Third Point, a hedge fund headed by Daniel Loeb, launched a campaign to get Nestlé to sell its L’Oréal shares.
After the latest transaction, Nestlé will retain its two positions on the L’Oréal board of directors.
On the same day, Nestlé also unveiled a new share buyback program to repurchase 20 billion Swiss francs (US$21.6 billion) worth of shares between 2022 and 2024. The plan, expected to commence on Jan. 3, is subject to regulatory approvals and may be adjusted if any sizable acquisitions take place, Nestlé said.