# Nestle sale of L’Oreal shares pleases investors on both sides Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-12-08 Category: INVESTING Category URL: https://financedigest.com/category/investing Meta Title: Nestle & L'Oreal Shares Rise as Swiss Food Giant Meta Description: Shares in Nestle and L'Oreal rose after the Swiss group reduced its stake in the French beauty giant, pleasing investors and maintaining ties between the URL: https://financedigest.com/nestle-sale-of-loreal-shares-pleases-investors-on-both-sideshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2021-12-08t081134z1lynxmpehb709trtroptp4l-oreal-france-1736836632098-compressed.jpg) By Gwénaëlle Barzic and Silvia Aloisi PARIS (Reuters) -Shares in Nestle and L’Oreal rose on Wednesday after the Swiss food group trimmed its stake in the French beauty giant, a deal that pleases investors on both sides while keeping ties between the two companies broadly intact – at least for now. The Nescafe maker has been a major shareholder in the owner of brands like Lancome since 1974, when L’Oreal heiress Liliane Bettencourt entrusted nearly half her stake to Nestle for fear it would be nationalised if Socialists came to power. The presence of Nestle, which is cutting its [stake to just over 20% from 23% by selling](https://www.financedigest.com/intercos-fund-shareholders-l-catterton-otpp-sell-6-stake-at-7-discount.html "Intercos fund shareholders L Catterton, OTPP sell 6% stake at 7% discount") shares worth about $10 billion, alongside the L’Oreal founding family helped insulate the French group from unsolicited takeover bids. For Nestle, it has proved a great investment. L’Oreal [shares yielded](https://www.financedigest.com/shares-slip-yields-rise-as-u-s-data-sparks-rate-hike-concerns.html "Shares slip, yields rise as U.S. data sparks rate hike concerns") a total return of 11% on an annualised basis since then, excluding dividends, according to analysts at Vontobel. They [hit a record](https://www.financedigest.com/londons-ftse-100-hits-fresh-record-high-as-telecoms-surge.html "London’s FTSE 100 hits fresh record high as telecoms surge") high of 433.65 euros on Wednesday, having more than trebled in value since Nestle first sold an 8% holding in 2014. The [stake Nestle is selling](https://www.financedigest.com/kkr-sells-50-stake-in-spains-x-elio-to-partner-brookfield.html "KKR sells 50% stake in Spain’s X-elio to partner Brookfield") will be bought back by L’Oreal, increasing the Bettencourt Meyers family holding to 34.7% from around 33%. Good [business for both,” said broker](https://www.financedigest.com/reasons-why-you-should-hire-a-business-broker-to-sell-your-business.html "Reasons Why You Should Hire a Business Broker to Sell Your Business") Jefferies. It reduces Nestle’s exposure to L’Oreal, which at about 16% of its [market cap pre-transaction was becoming](https://www.financedigest.com/forget-the-funnel-financial-marketing-must-become-a-virtuous-circle.html "Forget the funnel: Financial marketing must become a virtuous circle") troublingly high. It makes L’Oreal’s [balance sheet](https://www.financedigest.com/ecbs-villeroy-lays-out-plan-for-shrinking-balance-sheet.html "ECB’s Villeroy lays out plan for shrinking balance sheet") somewhat more efficient, while keeping ownership ‘in the family’. [Shares in both companies opened more than 1% higher](https://www.financedigest.com/asia-shares-creep-higher-wary-on-fed-and-boj-outlooks.html "Asia shares creep higher, wary on Fed and BOJ outlooks") on Wednesday. “BEST OF BOTH WORLDS” Nestle’s holding in L’Oreal has been the subject of intense scrutiny over the years as Chief Executive Mark Schneider pivoted the company towards nutrition and wellness, and activist investor Third [Point in 2017 urged the Swiss group](https://www.financedigest.com/new-intelligence-points-to-pro-ukraine-group-in-nord-stream-attack-nyt.html "New intelligence points to pro-Ukraine group in Nord Stream attack -NYT") to sell out. According to a source with knowledge of the negotiations, Tuesday’s announcement was the [result of two months of talks that involved the chairmen of both companies](https://www.financedigest.com/swiss-insurance-company-helvetia-uses-squirro-to-deliver-better-search-results-to-its-five-million-customers.html "Swiss insurance company Helvetia uses Squirro to deliver better search results to its five million customers"). Nestle was keen to maintain a holding above 20%, allowing it to consolidate the [investment on accounts](https://www.financedigest.com/investing-blockchain-technologies-made-simple-new-quantatex-alternative-investment-account.html "Investing in Blockchain Technologies made simple with new Quantatex Alternative Investment Account"). The source said Nestle was unlikely to [sell more of its stake](https://www.financedigest.com/dksh-sells-its-25-stake-in-swiss-luxury-watchmaker-bovet.html "DKSH sells its 25% stake in Swiss luxury watchmaker Bovet") for now, unless it decided to go for a big acquisition. When your financial investment reaches all-time highs, it is not surprising that you monetise some of it, especially when there is no strategic partnership and when it can [continue to fuel your equity story of strong](https://www.financedigest.com/swedish-match-continues-to-see-strong-smoke-free-sales-growth.html "Swedish Match continues to see strong smoke-free sales growth") cash returns,” analysts at Bernstein said. Nestle, which retains two [members on L’Oreal’s board](https://www.financedigest.com/bottlenecks-supply-problems-improving-at-abb-robotics-division-board-member.html "Bottlenecks, supply problems improving at ABB robotics division – board member"), “can keep doing this several times in the next decade,” they said. A spokesman for Nestle said the [stake sale](https://www.financedigest.com/sap-to-cut-3000-jobs-explore-qualtrics-stake-sale.html "SAP to cut 3,000 jobs, explore Qualtrics stake sale") left the company in a “best of both worlds” situation. On the one hand, we monetise around 9.3 [billion Swiss francs (8.9 billion euros)](https://www.financedigest.com/mercedes-benz-to-buy-back-up-to-4-billion-euros-in-shares-by-2025.html "Mercedes-Benz to buy back up to 4 billion euros in shares by 2025"). On the other hand, it keeps us involved with a very [successful company,”](https://www.financedigest.com/setsquared-companys-maths-system-adds-up-to-pitch-perfect-palace-success.html "SETsquared company’s maths system adds up to pitch-perfect palace success") he said. Centerview acted as lead adviser to L’Oreal while [Credit Suisse](https://www.financedigest.com/bank-shares-rise-after-credit-suisse-rescue-eases-crisis.html "Bank shares rise after Credit Suisse rescue eases crisis") advised Nestle. ($1 = 0.8859 euros) (Additional [reporting by Mike Shields](https://www.financedigest.com/asia-pacific-region-to-lead-the-global-static-shielding-bags-market-fact-mr-report.html "Asia Pacific Region to Lead the Global Static Shielding Bags Market: Fact.MR Report") in Zurich, Mimosa Spencer and Dominique Vidalon in Paris) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---