L’Oréal ready to buy Nestlé’s €23bn stake in cosmetics group
Chief Jean-Paul Agon says French company ‘has what it takes’ to obtain holding
The chief executive of L’Oréal has said that if Nestlé wanted to sell its 23 per cent stake in the French cosmetics company, L’Oréal would be a buyer and “we have what it takes” to do so.
Asked if L’Oréal would be a buyer if Nestlé were to sell the stake, which is worth about €22.6bn, Jean-Paul Agon said in an interview: “Yes, of course.”
He added: “We have all the resources for that. We are cash rich . . . we have our Sanofi stake, we are absolutely financially very solid and we have what it takes to do anything.”
Mr Agon was referring to L’Oréal’s 9 per cent stake in pharmaceuticals company Sanofi, which it could sell to help buy out Nestlé. That holding is valued at about €7.6bn. In addition, L’Oréal had €1.87bn in cash on its balance sheet as of December 31.
His comments on the Nestlé stake, which came as L’Oréal reported a 15.3 per cent rise in net profit during 2017 to €3.58bn, are the first by L’Oréal since activist hedge fund Third Point bought a small position in the Swiss foods group last June.
Dan Loeb, Third Point’s founder, has urged Nestlé to offload the stake, which it has held for more than four decades.
Nestlé’s stake became the subject of further scrutiny following the death last September of Liliane Bettencourt, the matriarch of L’Oréal’s founding family, which analysts said at the time could be a catalyst for a shake-up of L’Oréal’s share capital.
Nestlé declined to comment.
L’Oréal’s profit growth was driven by strong performances from its luxury division — home to brands such as Lancôme, YSL and Giorgio Armani — and from Asia, its fastest-growing region.
Revenue growth accelerated to 5.5 per cent on a like-for-like basis in the fourth quarter, bringing full-year sales to €26bn, up 4.8 per cent year-on-year.
“Chinese consumers everywhere are a large part of the growth of the luxury market,” says Mr Agon: “Chinese in China, Chinese in Hong Kong, Chinese in Japan, Chinese in travel retail, but also Chinese in Europe.”
Growth was more muted in North America, up 1.7 per cent, and in western Europe, up 2.6 per cent. It was also slower in professional products, which includes rands such as Kérastase and Redken, which was up 0.2 per cent in 2017. Consumer products grew 2.2 per cent.
Ecommerce sales grew by a third during 2017 to reach €2bn. China is the group’s top market for online sales, accounting for a quarter of all of its sales in the country.
Mr Agon, 61, who has been chief executive since 2006, said he would retire when he reaches 65. L’Oréal has not publicly commented on his likely successor but the favourite is Nicolas Hieronimus, who joined the company more than 30 years ago and was promoted deputy chief executive last year.
Under the terms of a shareholder agreement, neither Nestlé nor the Bettencourt family can buy more L’Oréal shares until six months after Liliane’s death — a period that runs up until the end of March. Mr Agon said he believed it was “very unlikely” that Nestlé will launch a takeover bid for L’Oréal.