Nestlé will not make a decision on L’Oréal stake until 2014

By Simon Pitman

- Last updated on GMT

Related tags: L'oréal

Nestlé chairman Peter Brabeck says the company will not make a decision on what to do with its 30 per cent stake in L’Oréal until 2014, when selling restrictions are lifted.

Speaking at the food giant’s annual general meeting, Brabeck’s comments are likely to fuel speculation over whether the company will want to sell the stake, hold on to it or even increase the investment with the aim of becoming a majority shareholder.

“Further ahead, although your board of directors has already started to reflect on it, is the extremely important and complex issue of the future or our involvement in L’Oréal, which we will decide upon in 2014,”​ Brabeck stated during the meeting.

The year 2014 is significant because it marks the end of a 10-year standstill agreement that does not allow Nestlé to sell its stake in the L’Oréal business, which is still majority owned by the Bettencourt family.

Speculation remains over Nestlé's strategy

Nestlé first acquired the stake in L’Oreal more than 30 years. In 2004 it owned a 26.4 per cent stake, which subsequently rose to 30 per cent after further investments.

Last year there was significant speculation over whether or not Nestlé were considering raising their investment in the world’s biggest cosmetic and personal care company.

However, this speculation was quashed at the end of last year in an interview with French magazine Le Point, when L’Oréal chairman Lindsay Owen-Jones was quoted as saying that a takeover bid by the Swiss food company was ‘unlikely’.

To focus on food, or not to focus on food...

Further doubts over a Nestlé takeover bid have been expressed by market experts after the food giant sold off its majority stake in eye care business Alcon Inc for around €20bn last year, in a deal that sharpened the company’s focus on the food industry.

On the other side of the fence, some experts believe that this sale strengthened Nestlé’s war chest, giving it sufficient funds to invest in a majority stake in the L’Oréal business, if executives see fit.

Currently the L’Oréal heiress Liliane Bettencourt owns a 31 per cent stake in the business, which is estimated to be worth in the region of €15bn.

Following on from the Nestlé executive comments during the AGM yesterday, L’Oréal shares fell by around 1.5 per cent to close at €82.87, while Nestlé share prices rose by around the same percentage.

Related topics: Business & Financial

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