By Yifan Wang 
 

Nestle SA has agreed to cut its stake in L'Oreal SA by selling $10.0 billion of shares back to the French cosmetics maker, the latest development toward a long-speculated decoupling of two of the world's biggest consumer-goods companies.

Under the agreement, Nestle will sell 22.26 million L'Oreal shares for a total consideration of 8.9 billion euros, the two companies said late Tuesday. L'Oreal will fund the deal with cash and debt, and cancel the repurchased shares. The transaction will have an accretive effect on its earnings per share of more than 4% in a full year, L'Oreal said.

The deal will bring down Nestle's stake in L'Oreal to 20.1% from 23.3%, marking the Swiss company's first time to reduce its shareholding in L'Oreal since 2014.

Analysts have for years anticipated a potential eventual exit by Nestle from L'Oreal. In 2017, the Nescafe maker's relationship with L'Oreal came under particular scrutiny, as Third Point, a hedge fund headed by Daniel Loeb, launched a campaign to get Nestle to sell its L'Oreal shares.

After the latest transaction, Nestle will retain its two positions on the L'Oreal board of directors.

On the same day, Nestle also unveiled a new share-buyback program to repurchase 20 billion Swiss francs ($21.6 billion) of shares between 2022 and 2024. The plan, expected to commence on Jan. 3, is subject to regulatory approvals and may be adjusted if any sizable acquisitions take place, Nestle said.

As a result of the deal, the stake held by L'Oreal's other large investor, the Bettencourt Meyers family, increases to 34.7% from 33.3%. L'Oreal said the French financial market supervisor wouldn't require the family to launch a takeover offer, which is usually required when a shareholder crosses the threshold of one third of the capital and voting rights of a company.

 

Sarah Sloat in Barcelona contributed to this article.

 

Write to Yifan Wang at yifan.wang@wsj.com

 

(END) Dow Jones Newswires

December 08, 2021 03:35 ET (08:35 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.
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