L’Oreal confirms that resources for buyback include Sanofi share

Following Nestle’s announcement that it may not renew its contract with L’Oreal in 2014, there was speculation that the cosmetics giant could liquidate its share in the French pharmaceutical company in order to free up resources.   

In his first public statements on the matter, CEO Jean-Paul Agon confirmed that this could be the case and also clarified his earlier comments to the Les Echoes newspaper. He avoided discussing the company’s future plans in detail.

Agon said: "I didn't say that we wished to buy Nestle's holding, I simply said that we have significant financial resources because of our positive balance sheet and 9 percent of Sanofi."​

He elaborated: "I didn't say we would be ready or we desire to buy the stake."​

Right of first refusal​

On August 29, Nestle announced that they would not renew their right of first refusal with the company in 2014.

They also said that they were keeping all options on the table regarding their share in L’Oreal, valued at approximately €23bn, including maintaining the current status quo.

In the company’s first half results, released on August 29, Agon highlighted their willingness to potentially liquidate the Sanofi share: "We have always said that our stake in Sanofi is financial and not strategic, so therefore we could use it if an opportunity presented itself."​

L’Oreal is also in a “robust” ​financial position, with net cash reserves of €572 after a substantial increase in operating profit during 2013.

If sold, the 9 per cent share of Sanofi would be worth approximately €9bn at current market prices.

Share prices jump​

Following Agon’s announcement L’Oreal’s share prices rose steeply after taking a dive in mid-August; as of September 2 they gained by more than 6 percent to €128.50.

This gives the company an overall valuation of €77.2bn, putting the group at its highest level in terms of share price for the last three years.