L'Oreal ready to buy shareholder Nestle's stake in the firm, says CEO

L'Oreal stands ready to buy Nestle's 23 percent stake in the firm should its Swiss shareholder choose to sell, and it could finance a purchase through cash, by selling its Sanofi stake or by borrowing, L'Oreal's CEO said.

"If Nestle one day wants to sell, we are ready," L'Oreal's Chairman and Chief Executive Jean-Paul Agon told a news conference on Friday, after the cosmetics company released its fourth-quarter earnings on Thursday.

"We have 1.8 billion euros (1.58 billion pounds) in cash, we have the Sanofi stake. We are also a very serious and loyal and active shareholder in Sanofi, but in case we will be ready and I'm sure if it was not enough, we have many love letters from banks that have said that they would love to lend us some money."

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Agon added that any decision to sell was in Nestle's hands.

Shares in French cosmetics group L'Oreal rose on Friday after its fourth quarter sales beat expectations, along with a confident outlook for 2018, while earlier comments regarding its intentions on Nestle further buoyed the stock.

L'Oreal shares were up 1 percent in early session trading, among the top gainers on France's blue-chip CAC-40 index.

Nestle shares were up 0.7 percent.

"Q4 17 organic sales of 5.5 percent is 50 basis points above Inquiry Financial consensus of 5 percent, strong 2018 outlook," Liberum analysts wrote in a note, retaining a "hold" rating on L'Oreal shares.
L'Oreal Chairman and Chief Executive Jean-Paul Agon said on Thursday he was confident of significant growth in like-for-like sales in 2018.

This was after L'Oreal reported that sales had risen by a better-than-expected 5.5 percent in the fourth quarter on a comparable basis.

"FY 2017 results are reassuring", added Investec Securities analysts, who kept a "buy" rating on the stock.
"We note CEO Agon's interview in the Financial Times, reiterating L'Oreal's willingness to buy Nestle's 23 percent take.. Scarcely a surprise, but this may excite some: an acquisition of the stake by L'Oreal, part-funded by a sale of its own Sanofi stake would be circa 10 percent accretive, we think.," the brokerage added.

The death in September of billionaire Liliane Bettencourt has focused attention on how L'Oreal's founding family and major shareholder Nestle would manage their stakes in the world's biggest cosmetics firm.

Meanwhile billionaire investor Daniel Loeb, founder of hedge fund Third Point, has pushed for Nestle to sell its L'Oreal stake as he keeps up pressure with demands that Nestle move faster to overhaul its general corporate strategy.