L’Oreal has indicated its readiness and willingness to acquire the 23% stake that Nestle owns in the largest cosmetics firm in the world. The cosmetics giant has said that the purchase could be financed using cash, bank loans or selling a stake in Sanofi, a pharmaceutical firm based in France.
Following the death of Liliane Bettencourt last year in September, attention has moved to how the founding family of L’Oreal and the Swiss food giant, its major shareholder, will go about managing their stakes. The founder of Third Point, a hedge fund, Daniel Loeb, wants Nestle to dispose of its stake in L’Oreal in order to accelerate a strategy overhaul at the Swiss food giant.
“We have 1.8 billion euros in cash, we have the Sanofi stake. We are also a very serious and loyal and active shareholder in Sanofi … we have many love letters from banks that have said that they would love to lend us,” said Loeb.
Following the reports shares of L’Oreal rose and was among the highest gainers in the blue chip index of France. Some of L’Oreal’s brand ambassadors include Hollywood celebrities such as Blake Lively, Eva Longoria and Hellen Mirren.
At the current market prices the 9% stake that L’Oreal owns in Sanofi is valued at over seven billion euros. The cosmetics giant ventured into the pharmaceutical sector more than four decades ago after acquiring Synthelabo which later merged with the drugs business of Elf Aquitaine in the late 90s. L’Oreal retained its interested in the larger Sanofi group.
This comes in the wake of the French cosmetics giant posting its quarter results which showed that revenue growth went up by 5.5% to reach a figure of 26 billion euros for the whole year. The profit growth of the company was largely driven by the solid performance of the luxury unit which comprises of brands such as Giorgio Armani, Yves Saint Laurent and Lancome. Asia, the fastest-growing market for L’Oreal, also contributed hugely to the profit growth.
Growth was slower in North America where it registered a figure of 1.7% while in Western Europe it went up by 2.6%. Professional products of L’Oreal such as Redken and Kerastase also recorded slower growth of 0.2% last year. Consumer products on the other hand saw a growth of 2.2%
Online sales of the cosmetics giant increased by a third last year and reached a figure of 2 billion euros. The biggest online market for L’Oreal was China where approximately 25% of the cosmetic giant’s sales in the country were via online channels.