By  on July 21, 2010

PARIS — L’Oréal is increasingly getting entangled in the Bettencourt scandal.

A shareholder in the French beauty giant alleging photographer François-Marie Banier benefited from a contract of convenience with the company recently lodged a complaint over alleged misuse of corporate funds that caused the public prosecutor’s office here to open a preliminary inquiry.

Banier is at the center of the Bettencourt affair following revelations L’Oréal’s largest shareholder showered him with gifts worth up to 1 billion euros, or $1.3 billion at current exchange.

The shareholder’s complaint, which was filed on July 5 “against X,” marks the first time L’Oréal’s name has been directly linked to Banier and there have been allegations over corporate finances. The shareholder’s lawyer Frédérik-Karel Canoy claimed Banier has had a 10-year contract with L’Oréal for his fashion advice and artistic sensibility that pays him — through his company called Hericy — 405,000 euros, or $522,116 at current exchange, a year, excluding tax.

A L’Oréal spokeswoman said Tuesday, “We have taken note of the complaint filed against X. We have not been informed of its contents and therefore cannot comment on it. We confirm the existence of a contractual agreement, which is of public knowledge, with François-Marie Banier [for] 10 years ending in 2011.”

Canoy said that following the first L’Oréal shareholder’s complaint, about 60 other company shareholders have joined him.

This preliminary inquiry is one of many that have been initiated since Françoise Bettencourt Meyers brought initial legal proceedings against Banier in December 2007. She alleges Banier’s “exploitation of weakness” of her 87-year-old mother. Liliane Bettencourt, the daughter of L’Oréal’s founder, argues in turn that she is sound and acting on her own free will. Banier’s hearing date is still pending.

Meanwhile, there is mounting speculation here about how the Bettencourt affair might impact L’Oréal’s future ownership.

As reported, during a live TV interview on July 12, France’s president Nicolas Sarkozy said, “I wish that [Mrs. Bettencourt] remains owner of L’Oréal and that [the company], 17 billion euros in sales, 64,000 employees, doesn’t leave for another country,” he said. “Because at that moment, who pays? It’s the employees who lose their jobs.”

The question about possible future foreign ownership also bubbled up in the Financial Times Monday.

At year-end 2009, Bettencourt held 31 percent of L’Oréal; she has given Bettencourt Meyers her stake in bare ownership. Nestlé had 29.8 percent.

According to the principal terms of the agreement between the Bettencourt family and Nestlé, neither party can increase its stake in L’Oréal during Bettencourt’s lifetime and until six months after her death. Since April 29, 2009, the parties have been free to sell their shares, with each of them having conceded the other a first right of refusal until April 29, 2014. After then, each party may offer shares to any third party.

“The future of Nestlé’s participation in L’Oréal is an important topic for the group, which the Nestlé board of directors is addressing with great attention in the framework of the group’s global nutrition, health and wellness strategy,” said a Nestlé spokesman. “Nestlé will continue to take a long-term strategic view in the shareholders’ best interest and will, when appropriate, make its decisions in a way that is most conducive to the long-term success of the company.”

L’Oréal recently published strong second-quarter sales, which rose 12.4 percent to 4.95 billion euros, or $6.3 billion at average exchange rates for the period.

The company’s stock closed down 0.71 percent to 81.55 euros, or $105.13 at current exchange, on the Paris Bourse Tuesday.

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