UPDATE: L’Oreal's CEO reveals brand is looking at all scenarios

By Michelle Yeomans contact

- Last updated on GMT

Related tags: L'oréal

L'Oreal / Nestle shares
The future of Nestle’s 29% stake in L’Oreal has been a hot topic of late, with various industry analysts weighing in on potential scenarios. Now CEO Jean-Paul Agon speaks out on the matter, revealing that whilst Nestle is in ‘control’, the cosmetics company is looking at all scenarios.

Agon recently told news publication 'The Telegraph' that whilst the ultimate decision is in the hands of Nestle, L’Oreal is also looking at all the scenarios - a somewhat vague answer. The publication also reported the CEO as seemingly agreeing that the partners will go their separate ways, as the "the fields of nutrition are obviously very different.”

On questioning if L'Oreal would go into debt as a result of buying the stake back, the CEO responded;  “I cannot say anymore, except that I’m pretty confident that at the end there will be a good solution for everybody."

It all started back in 1974, when daughter of L’Oreal’s founder Lilianne Bettencourt invited Nestle to buy half her stake as she feared the French government would nationalise the company. The threat never came, but the pact has remained intact. 

And despite the food manufacturer previously stating that it would not decide on the future of its stake before 2014, Chairman Peter Brabeck recently implied Nestlé did not necessarily intend to renew its contract with the cosmetics giant.

What could potentially happen…

As Nestlé investors met at its headquarters for a seminar last month, Euromonitor summarized for CosmeticsDesign-Europe.com why the sale could potentially happen and how it might go down.

Whilst some say the conglomerate ‘lacks good reason’ to sell off the cosmetics giant, Euromonitor senior analyst, Oru Mohiuddin, says a potential sale could be more about the decline of emerging markets and the macro-economic state, rather than the fact that L’Oreal has been underperforming.

According to Mohiuddin, despite L’Oréal’s share price increasing by about a third in the last year, macro-economic challenges may mean “the trajectory will not be the same going forward, so hypothetically, L’Oreal may not be able to deliver as it has been.”

The market analyst tells Cosmetics Design that a potential sale will not be something Nestle is doing by choice but rather by compulsion to improve their leverage.

And that the offer of the share will attract a lot of suitors, perhaps from the likes of existing beauty companies wanting to further invest in the industry, or another conglomerate.

Or indeed, the Euromonitor expert adds, if L’Oreal was interested in buying back their share, it would be in a very strong position to do so with a very strong cash balance and very able CEO and management who has performed  well.

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