Nestle to Decide on L’Oreal in 2014, Chairman Brabeck Says
By Tom Mulier - Apr 14, 2011 9:20 AM PT
Nestle SA (NESN) said it will decide what to do with its stake of 30 percent in L’Oreal SA, the world’s biggest cosmetics maker, in 2014, the year that restrictions on the foodmaker selling the holding to a third party are lifted.
Nestle’s board has started considering its options concerning the “extremely important and complex issue of the future of our involvement in L’Oreal,” Chairman Peter Brabeck- Letmathe said at the company’s annual shareholder meeting today in Lausanne, Switzerland.
The world’s largest food company bought a stake in L’Oreal in 1974 from the Bettencourt family, which still owns about 31 percent. Nestle’s holding is now worth about 14.7 billion euros ($21.2 billion). The maker of KitKat bars has agreed with L’Oreal’s 88-year-old main shareholder, Liliane Bettencourt, not to raise the stake until six months after her death.
Speculation that Nestle could buy the rest of L’Oreal has increased after the food company received $28.3 billion for a majority stake in eye-care company Alcon Inc. Brabeck has repeatedly said Nestle needs to decide if L’Oreal fits in the strategy of a “nutrition, health and wellness” company. He said in September, 2009, that it “could make sense to have L’Oreal as a strategic investment instead of a financial one.”
“They just want some breathing space,” Chas Manso de Zuniga, an analyst at Evolution Securities in London, said by phone. “Basically, he’s clearing the air for three years.”
L’Oreal shares fell 82 cents, or 1 percent, to 82.27 euros at the 5:30 p.m. close in Paris.
‘Profoundly Committed’
Francoise Bettencourt Meyers, the daughter of Liliane, said in March 2010 she is “profoundly committed” to L’Oreal and the family wants to continue assisting the company’s development.
Nestle and the Bettencourt family gave each other a right of first refusal over their stakes that runs through April 29, 2014, according to their agreement. In that year, Nestle would be able to sell its stake to a third party without consulting the Bettencourt family.
Brabeck’s responsibilities included relations with Alcon and L’Oreal when he transferred his role as chief executive officer to Paul Bulcke in 2008 because Nestle considered those holdings “financial” investments, the chairman said today.
Nestle, based in Vevey, Switzerland, sold Alcon because the company no longer needed funding and instead required help in pharmaceutical research, Brabeck said. Nestle obtained a total of 45 billion francs ($50.5 billion) for the eyecare company, which it bought in 1977 for $280 million, the chairman said.
‘Transformation Process’
Brabeck said he presented Nestle’s board with a proposal in 2000 to create a “wellbeing company” present in personal-care products and pharmaceuticals. The company decided the “vision was too ambitious at that time and that Nestle should concentrate on the first stage of the transformation process,” he said.
Nestle then focused on nutrition, buying the Gerber baby food brand, Jenny Craig weight-loss services and a medical nutrition business from Novartis AG. Last year, Nestle created a unit called Nestle Health Science to make food products that may prevent chronic disease.
By Tom Mulier - Apr 14, 2011 9:20 AM PT
Nestle SA (NESN) said it will decide what to do with its stake of 30 percent in L’Oreal SA, the world’s biggest cosmetics maker, in 2014, the year that restrictions on the foodmaker selling the holding to a third party are lifted.
Nestle’s board has started considering its options concerning the “extremely important and complex issue of the future of our involvement in L’Oreal,” Chairman Peter Brabeck- Letmathe said at the company’s annual shareholder meeting today in Lausanne, Switzerland.
The world’s largest food company bought a stake in L’Oreal in 1974 from the Bettencourt family, which still owns about 31 percent. Nestle’s holding is now worth about 14.7 billion euros ($21.2 billion). The maker of KitKat bars has agreed with L’Oreal’s 88-year-old main shareholder, Liliane Bettencourt, not to raise the stake until six months after her death.
Speculation that Nestle could buy the rest of L’Oreal has increased after the food company received $28.3 billion for a majority stake in eye-care company Alcon Inc. Brabeck has repeatedly said Nestle needs to decide if L’Oreal fits in the strategy of a “nutrition, health and wellness” company. He said in September, 2009, that it “could make sense to have L’Oreal as a strategic investment instead of a financial one.”
“They just want some breathing space,” Chas Manso de Zuniga, an analyst at Evolution Securities in London, said by phone. “Basically, he’s clearing the air for three years.”
L’Oreal shares fell 82 cents, or 1 percent, to 82.27 euros at the 5:30 p.m. close in Paris.
‘Profoundly Committed’
Francoise Bettencourt Meyers, the daughter of Liliane, said in March 2010 she is “profoundly committed” to L’Oreal and the family wants to continue assisting the company’s development.
Nestle and the Bettencourt family gave each other a right of first refusal over their stakes that runs through April 29, 2014, according to their agreement. In that year, Nestle would be able to sell its stake to a third party without consulting the Bettencourt family.
Brabeck’s responsibilities included relations with Alcon and L’Oreal when he transferred his role as chief executive officer to Paul Bulcke in 2008 because Nestle considered those holdings “financial” investments, the chairman said today.
Nestle, based in Vevey, Switzerland, sold Alcon because the company no longer needed funding and instead required help in pharmaceutical research, Brabeck said. Nestle obtained a total of 45 billion francs ($50.5 billion) for the eyecare company, which it bought in 1977 for $280 million, the chairman said.
‘Transformation Process’
Brabeck said he presented Nestle’s board with a proposal in 2000 to create a “wellbeing company” present in personal-care products and pharmaceuticals. The company decided the “vision was too ambitious at that time and that Nestle should concentrate on the first stage of the transformation process,” he said.
Nestle then focused on nutrition, buying the Gerber baby food brand, Jenny Craig weight-loss services and a medical nutrition business from Novartis AG. Last year, Nestle created a unit called Nestle Health Science to make food products that may prevent chronic disease.