Nestlé to Sell Back 8% of L'Oréal for $8.88 billion

11 Feb 2014 --- Nestlé and L’Oréal have announced today that their respective Boards of Directors, in meetings held on February 10th, 2014, have approved by unanimous decision of their voting members a strategic transaction for both companies under which L’Oréal will buy 48.5 million of its own shares (8% of its share capital) from Nestlé.

This buyback will be financed:

•    Partially through the disposal by L’Oréal to Nestlé of its 50% stake in Swiss dermatology pharmaceuticals company Galderma (a 50/50 joint venture between L’Oréal and Nestlé) for an enterprise value of 3.1 billion euros (2.6 billion euros of equity value), paid by Nestlé in L’Oréal shares (21.2 million shares).
•    For the remainder, corresponding to 27.3 million L’Oréal shares held by Nestlé, in cash for an amount of 3.4 billion euros.

The price per L’Oréal share retained for this transaction is the average of its closing prices between Monday November 11th, 2013 and Monday February 10th, 2014: 124.48 euros.

All the shares bought back by L’Oréal will be cancelled. Following the transaction, Nestlé’s stake in L’Oréal will be reduced from 29.4% to 23.29% of the share capital and the Bettencourt Meyers family’s stake in L’Oréal will increase from 30.6% to 33.31%. In order to reflect the change of Nestlé’s stake in L’Oréal’s governance, the number of Nestlé representatives on L’Oréal’s Board of Directors will be adjusted from 3 to 2 Directors, and the ownership ceiling provisions of the shareholders’ agreement between Nestlé and the Bettencourt Meyers family will apply to their respective new holdings.

The transaction will be accretive by more than 5% on L’Oréal’s recurring earnings per share on a full year basis. The buyback will be exclusively financed with L’Oréal’s available cash and through the issuance of commercial paper. It will not require the disposal of Sanofi shares held by L’Oréal.

The transaction is subject to customary conditions, including the prior consultation of Galderma’s and L’Oréal’s works councils and the clearance of relevant antitrust authorities. It is expected to close before the end of the first semester of 2014.

Mr. Peter BRABECK-LETMATHE, Chairman of Nestlé, said: “With this proposed acquisition of 50% of Galderma, Nestlé will pursue its strategic development in Nutrition, Health, and Wellness, by expanding its activities to medical skin treatments.”

In this respect, Nestlé will create a new centre of activities in this area, through a new entity: Nestlé Skin Health SA. Galderma will be the foundation of this entity which will be run by Galderma’s management.

As a wholly owned subsidiary of Nestlé, Galderma will have all the required means for its development which will benefit to the company, its employees as well as all other stakeholders.

Following the decrease of its stake in L’Oréal, Nestlé will continue to support the development of L’Oréal as in the past 40 years. In this context, Nestlé will continue to act in concert with the Bettencourt Meyers family and the existing agreements, adapted to the new situation, will remain in place.”

Mr. Jean-Paul AGON, Chairman and Chief Executive Officer of L'Oréal, said: “This transaction represents a very positive strategic move for L’Oréal, its employees and its shareholders. L’Oréal will focus exclusively on its Cosmetics business and its “Beauty for all” mission, its universalisation strategy and its ambition to win one billion new consumers. L’Oréal will indeed benefit from a very significant and reinforced presence from the founding Bettencourt Meyers family, who will continue to fully support the company as it always did in the past. L’Oréal will also continue to benefit from the support of Nestlé, which has always been a loyal and constructive shareholder. Lastly, all of L’Oréal’s shareholders will benefit from this transaction with an accretive impact on the company’s earnings, resulting from the buyback and subsequent cancellation of L’Oréal shares held by Nestlé.”

Over several sessions the Nestlé Board of Directors has elaborated and approved a broadened strategic long-term orientation for the company, building on Nestlé’s historic strength as a science-based nutrition, health and wellness company.

The recent creation of Nestlé Health Science S.A. and the Nestlé Institute of Health Sciences reinforced this strategic direction and focus on helping consumers lead a healthier life through nutritional solutions from food and beverages to life-enhancing scientific products.

Responding to increasing consumer needs, Nestlé will extend its activities to include the field of specialised, medical skin treatments through the creation of Nestlé Skin Health S.A., a global leader focused on meeting the world’s increasing skin health needs with a broad range of innovative and scientifically-proven products.

Nestlé Skin Health S.A. will be managed as a wholly-owned Nestlé subsidiary with its own Board of Directors and headquarters located in Lausanne.

In line with this broadened strategy, the Nestlé Board of Directors has approved the sale of 48.5 million L’Oréal shares to L’Oréal for cancellation. Part of the proceeds will be used for the acquisition of the 50% stake of Galderma from L’Oréal, bringing our ownership of Galderma to 100%. Upon approval and completion of this transaction, Galderma will form the foundation of Nestlé Skin Health S.A. We will also merge Bübchen, our existing infant skin care business, into this newly-formed entity which will provide a sizeable platform for profitable growth.

In addition Nestlé intends to use the cash proceeds of this transaction to launch a share buyback programme.