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Analysts, Markets Respond Favorably to Nestlé-L’Oréal Share News

Financial analysts consider the transaction as good business for both companies.

PARIS — Financial analysts and markets smiled Wednesday on the news that Nestlé is reducing its stake in L’Oréal to 20.1 percent from 23.2 percent.

Bruno Monteyne, senior analyst for European food, European household and personal care at Bernstein, said in a note Wednesday that the move is supportive to both companies.

“This transaction was well-expected by the markets; it is entirely amicable and planned across the two parties,” he wrote.

“When your financial investment reaches all-time highs, it is not surprising that you monetize some of it, especially when there is no strategic partnership and when it can continue to fuel your equity story of strong cash returns,” continued Monteyne, referring to Nestlé and noting the Swiss group can continue to keep making such transactions several times over the next decade.

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Martin Deboo, an equity analyst at Jeffries, characterized the transaction as “good business for both” in a note released early Wednesday.

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“The question in our minds tonight is whether this is merely a one-off, or the start of a phased exit from L’Oréal by Nestlé, unfolding over the coming years,” he wrote.

L’Oréal stock was trading up 0.4 percent to 426.30 euros and Nestlé’s stock had risen 1.6 percent to 123.88 Swiss francs at 1:45 p.m. CET on Wednesday.

As previously reported, late Tuesday night Nestlé and L’Oréal said the Swiss food and drink conglomerate, which is the French beauty giant’s second-largest shareholder after the Bettencourt Meyers family, had agreed to sell 22.26 million shares in L’Oréal for a unit price of 400 euros.

That makes the total price to be paid to Nestlé equal to 8.9 billion euros, or 9.28 billion Swiss francs.

L’Oréal will then by Aug. 29, 2022, cancel the repurchased shares, which represent 4 percent of its capital, as part of its share buyback program.

Once the transaction closes, Nestlé will own 20.1 percent of L’Oréal, versus the 23.2 percent stake it holds today.

In March 2020, Nestlé revealed it was keeping its options open regarding its stake in L’Oréal.

For more, see:

Nestlé to Buy The Bountiful Company Core Brands for $5.75 Billion

Nestlé Continues Monitoring Strategic Options for L’Oréal

Nestlé Explores Options for Skin Health Division