Nestle cuts stake in L'Oreal, but staying for 'long haul'

Tue Feb 11, 2014 11:03am EST
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By Astrid Wendlandt and Pascale Denis

PARIS (Reuters) - Swiss food group Nestle NESN.VX is selling an 8 percent stake in L'Oreal (OREP.PA: Quote) to the French cosmetics firm for 6.5 billion euros ($9 billion), loosening their 40-year partnership and allowing both firms to boost earnings per share.

However, Nestle said on Tuesday it remained committed to the maker of Garnier shampoo and Lancome creams for the "long haul", dampening speculation it might sell its remaining 23 percent stake anytime soon.

"This transaction is a bit of a let down," Liberum Capital analysts said in a note, referring to media reports that L'Oreal might buy a larger proportion or even all of Nestle's stake.

At 9.25 a.m. ET L'Oreal shares, which had leapt on Monday on speculation of a larger stake purchase, were down 3.6 percent at 124.4 euros. Shares in Nestle, home to Gerber babyfood and Kit Kat chocolate bars, were down 1 percent at 66.9 Swiss francs.

Nestle Chairman Peter Brabeck told reporters the Swiss firm planned to stay a major investor in L'Oreal, which on Monday posted forecast-beating quarterly sales.

"I do not see this as a first step of leaving L'Oreal ... not at all," he said. "We are in here for the long haul".

However, asked if Nestle would consider selling another tranche of L'Oreal shares, Brabeck said: "We shall see."

The Swiss firm has been a major shareholder in L'Oreal since 1974, when L'Oreal heiress Liliane Bettencourt, now the world's richest woman, sold around half her stake to Nestle for fear L'Oreal would be nationalized if Socialists came to power.   Continued...

The logo of French cosmetics group L'Oreal is seen on the company's building in Clichy, near Paris February 11, 2014.REUTERS/Benoit Tessier