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Speculation Surrounding Clarins Intensifies

A tempest in a teapot.

PARIS — A tempest in a teapot.

That’s how the analysts queried view resurgent speculation that L’Oréal may bid for Groupe Clarins.

During trading Wednesday, in the run-up to Clarins’ profits announcement Thursday, the company’s stock spiked more than 8 percent. It closed at 60 euros, or $83.28 at current exchange, up 7 percent versus the prior day’s close.

“The market’s so jittery at the moment,” said one financial analyst, who requested anonymity. That analyst believes the market had responded to a confluence of events.

According to sources, broker Oddo Securities published Wednesday a report on L’Oréal in which it said Clarins would make an ideal prey. Oddo Securities would not release the report.

The analyst also believes the stock spike stemmed from the fact that L’Oréal executives have mentioned a desire to make either a large acquisition or a couple of medium-sized ones (the category into which Clarins would fall). Plus, the analyst said, Clarins has come out with somewhat disappointing numbers in the recent past. The trend continued Thursday, as the company reported a 12.4 percent drop in net profits for the first half.

The death of Clarins founder Jacques Courtin-Clarins in March added fuel to the rumor mill, since it was well known he opposed the sale of his company.

In April, his son, Olivier Courtin-Clarins, who is Clarins’ vice president of research and development, confirmed the company is not for sale. “They are rumors,” he told WWD at that point. “There is no change in capitalization. There is no need to sell. The company remains run by my brother and myself. There is no strategic change.”

He was referring to his brother Christian, who is Clarins’ president and chief executive officer. The family controls 65.1 percent of the company’s capital and 78.6 percent of its voting rights.

On Thursday, Pankaj Chandarana, Clarins’ finance director, would not comment on the recent speculation. Neither would a L’Oréal spokesman.

The subject of Clarins’ possible takeover remains a perennial market favorite.

“The listed European leader in prestige skin care has been seen as an obvious and attractive consolidation target for years because of its niche market position,” said Antoine Colonna, analyst at Merrill Lynch in a report called “Lap of Luxury IV, No Trojan War This Time Round,” which was published on Aug. 29.

He continues, “Besides a tie-up with L’Oréal, which could raise antitrust issues, the company could attract a long list of natural bidders. These include Estée Lauder, which is still searching for a sizeable purchase to bolster its international operations, to Shiseido, which we believe probably has the most compatible corporate culture, or even Beiersdorf, for obvious back-office synergies and R&D capabilities.

“At risk of being contrarian, we are inclined to believe the Courtin brothers will block any approaches for a while,” he writes. “More specifically, we would not be surprised if the group either signed an intermediate strategic agreement (for instance, with YSL Beauté) or, more radically, opted for an LBO [leveraged buyout], the scenario we consider to be the most likely at some point in the future.”

The other analyst believes a L’Oréal takeover “would not be such a crazy idea. L’Oréal has The Body Shop in the masstige market [and] Sanoflore in the natural part of the active cosmetics market, and Clarins would give a natural edge to L’Oréal’s luxury skin care brands,” he said, adding that Clarins’ Thierry Mugler and Azzaro fragrances could make nice additions to L’Oréal’s brand portfolio, as well.

That analyst, like other industry sources, maintains he does not believe Clarins is currently being actively shopped around for an eventual buyout.

After the French Bourse shut Thursday, Clarins reported that its first-half 2007 net profits fell 12.4 percent to 36.7 million euros, or $48.8 million at average exchange, versus the same prior-year period. At constant exchange, net profits were down 6.1 percent.

Clarins’ operating profit dropped 23.5 percent to 40 million euros, or $53.2 million. At constant exchange, it decreased 17.1 percent.

Operating margin, at 8.08 percent, declined 2.9 points in the half. .

As reported, Clarins registered first-half net sales of 494.6 million euros, or $658 million, up 4.2 percent year-on-year. At constant exchange, they rose 6.9 percent.

The company said it sold a portion of its stake in L’Occitane for 133.2 million euros, or $177.1 million. Thanks to that move and a positive free cash flow of 74.4 million euros, or $98.9 million, Clarins posted a “record level” of net cash, now standing at 129.2 million euros, or $171.8 million.

Clarins maintains its full-year guidance of 6 percent revenues growth at constant exchange for the year.

The company’s stock closed down 1.66 percent Thursday to a unit price of 59 euros, or $81.90 at current exchange.

consolidation target for years because of its niche market position,” said Antoine Colonna, analyst at Merrill Lynch in a report called “Lap of Luxury IV, No Trojan War This Time Round,” which was published on Aug. 29.

He continues, “Besides a tie-up with L’Oréal, which could raise antitrust issues, the company could attract a long list of natural bidders. These include Estée Lauder, which is still searching for a sizeable purchase to bolster its international operations, to Shiseido, which we believe probably has the most compatible corporate culture, or even Beiersdorf, for obvious back-office synergies and R&D capabilities.

“At risk of being contrarian, we are inclined to believe the Courtin brothers will block any approaches for a while,” he writes. “More specifically, we would not be surprised if the group either signed an intermediate strategic agreement (for instance, with YSL Beauté) or, more radically, opted for an LBO [leveraged buyout], the scenario we consider to be the most likely at some point in the future.”

The other analyst believes a L’Oréal takeover “would not be such a crazy idea. L’Oréal has The Body Shop in the masstige market [and] Sanoflore in the natural part of the active cosmetics market, and Clarins would give a natural edge to L’Oréal’s luxury skin care brands,” he said, adding that Clarins’ Thierry Mugler and Azzaro fragrances could make nice additions to L’Oréal’s brand portfolio, as well.

That analyst, like other industry sources, maintains he does not believe Clarins is currently being actively shopped around for an eventual buyout.

After the French Bourse shut Thursday, Clarins reported that its first-half 2007 net profits fell 12.4 percent to 36.7 million euros, or $48.8 million at average exchange, versus the same prior-year period. At constant exchange, net profits were down 6.1 percent.

Clarins’ operating profit dropped 23.5 percent to 40 million euros, or $53.2 million. At constant exchange, it decreased 17.1 percent.

Operating margin, at 8.08 percent, declined 2.9 points in the half.

As reported, Clarins registered first-half net sales of 494.6 million euros, or $658 million, up 4.2 percent year-on-year. At constant exchange, they rose 6.9 percent.

The company said it sold a portion of its stake in L’Occitane for 133.2 million euros, or $177.1 million. Thanks to that move and a positive free cash flow of 74.4 million euros, or $98.9 million, Clarins posted a “record level” of net cash, now standing at 129.2 million euros, or $171.8 million.

Clarins maintains its full-year guidance of 6 percent revenues growth at constant exchange for the year.

The company’s stock closed down 1.66 percent Thursday to a unit price of 59 euros, or $81.90 at current exchange.