By  on December 6, 2010

PARIS — In a surprising twist of events Monday, Françoise Bettencourt Meyers abandoned all the legal proceedings she had initiated in the Bettencourt affair.

The move, which suddenly ended the three-year Bettencourt family feud, sent tremors across France and was lauded by L’Oréal’s top management.

Bettencourt Meyers and her mother, 88-year-old L’Oréal heiress Liliane Bettencourt, issued jointly a statement saying they had reconciled to end the conflicts that had disrupted their family life and to drop the ensuing legal proceedings. The women added they had reached a common accord.

“The decision that Françoise and I have taken is for me a source of hope,” stated Bettencourt. “It corresponds to my wish to see the family reunited. We’re going to move forward together, for our common good and for L’Oréal, which is so much a part of my life.”

Bettencourt Meyers stated, “We made this agreement to find again familial harmony, shared just as much by my husband and our children as by my mother. I also desire it for the entire L’Oréal enterprise that continues its marvelous epic and to which I am profoundly attached.”

The long-running Bettencourt affair began in December 2007, when Bettencourt Meyers brought a lawsuit against photographer François-Marie Banier. She alleged Banier exploited the weakness of Bettencourt, who had given him assets valued at about 1 billion euros, or $1.3 billion at current exchange. Banier denied any wrongdoing and Bettencourt maintained she was sound and acting on her own free will.

Bettencourt Meyers had also initiated legal proceedings against Patrice de Maistre, her mother’s financial adviser, and Fabrice Goguel, Bettencourt’s former tax lawyer.

In mid-November, it was ruled that Bettencourt Meyers’ demand to have her mother placed under legal guardianship merited examination.

Bettencourt Meyers has dropped all legal proceedings she had initiated, as has her mother.

Major terms of the accord reached between Bettencourt Meyers and Banier include Banier agreeing to renounce everything that had been promised to him by Bettencourt that he had not yet received, according to a source close to the dossier. The source also said Banier committed to stay away from Bettencourt. (Banier, in mid-July, had already been cut out of Bettencourt’s will.)

The agreement Bettencourt Meyers reached with de Maistre stipulates he is to step down from his role in Téthys, the Bettencourt family holding company that oversees its 31 percent stake in L’Oréal. That should happen by Dec. 31.Bettencourt Meyers’ husband Jean-Pierre Meyers will replace de Maistre as Téthys’ managing director, and Bettencourt Meyers’ two sons are to join Téthys’ supervisory board. Meanwhile, Bettencourt remains Téthys’ president, although with a somewhat reduced operational role in its management.

Jean-Paul Agon, L’Oréal’s chief executive officer, lauded the Bettencourts’ reconciliation. In an internal company e-mail sent out Monday afternoon, he was quoted as saying, “I am delighted that our shareholders, Liliane Bettencourt and Françoise Bettencourt Meyers, are now in good terms and I am sure you will be as pleased as I am. This favorable development of their relationship is also very positive for our group and its employees, given that the family has also expressed its strong and joint commitment to L’Oréal.”

The Bettencourt family feud had risked impacting L’Oréal’s future ownership. Had Bettencourt been placed under guardianship, her position on the board of the company —in which she’s the largest individual shareholder — could have been at risk.

Susanne Seibel, a consumer analyst at Barclays Capital, thinks that since it’s likely the ownership structure of L’Oréal remains status quo, speculation about Nestlé (owner of about 30 percent of the French beauty giant) taking over the Bettencourt stake or Bettencourt Meyers selling to a third party once she has full control of L’Oréal “should recede. Operationally, [the Bettencourt affair] has had little impact on the base.”

“I don’t think that the affair has had a negative impact on the image of the company, and therefore will unlikely have a strong impact now,” continued UBS analyst Eva Quiroga. “Also, given they have so many different brands in their portfolio, consumers will be hard-pressed to identify that Lancôme comes from the same house as Biotherm and as L’Oréal Paris.”

The Bettencourt saga blossomed into an affair of state in July, when an allegation surfaced that Eric Woerth, while serving as France’s budget minister and UMP party treasurer in 2007, received a campaign donation for Nicolas Sarkozy from the Bettencourts that was well above the legal limit. It was also reported that Sarkozy had received envelopes of cash from them.

Woerth is being investigated, as well, for alleged influence peddling linked to his involvement in securing the Legion of Honor for de Maistre in 2008. Woerth had decorated de Maistre when de Maistre was Woerth’s wife’s boss at Bettencourt’s holding company.

And while the Bettencourt family feud may be settled, the French authorities continue to investigate Bettencourt over her former Swiss bank accounts and whether they’d been declared to tax authorities. On Nov. 17, Paris’ Supreme Court of Appeals ruled that the Bettencourt affair’s legal dossiers were to be transferred to Bordeaux, France, from the Paris suburb of Nanterre. It was deemed Bordeaux is better suited for the serene working of justice. Dossiers related to Woerth also will be reviewed by the Bordeaux court.

“What has been closed today is the family debate, no more,” said one political observer. “The rest is still ongoing. The French justice is slow, and because it is a very difficult case — with a lot of ramifications and debates —I don’t think it will be judged before the elections [for France’s president in 2012].”

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