L'Oreal to buy 8% of its shares from Nestle

Tuesday, 11 Feb 2014 | 2:05 AM ET
L'Oreal to buy back shares from Nestle
Tuesday, 11 Feb 2014 | 3:12 AM ET
L'Oreal stock rose on Tuesday morning as it announced that it would buy 8 percent of Nestle's stake in the cosmetic group and sell its stake in Galderma, reports CNBC's Stephane Pedrazzi.

L'Oreal will buy 8 percent of its capital for 6.5 billion euros ($9 billion) from Swiss consumer goods group Nestle, boosting the French cosmetics group's earnings per share by more than 5 percent.

The deal will cut Nestle's stake in L'Oreal to 23.29 percent from 29.4 percent while the Bettencourt Meyers family's stake in L'Oréal will increase from 30.6 percent to 33.31 percent, the company said in a statement.

Thomas Samson | AFP/Getty Images

The transaction will be partially funded through the sale by L'Oreal to Nestle of its 50 percent stake in Swiss dermatology pharmaceuticals company Galderma - a 50-50 joint venture between L'Oreal and Nestle - for an enterprise value of 3.1 billion euros (2.6 billion euros of equity value), paid by Nestle in L'Oreal shares (21.2 million shares).

The remainder, corresponding to 27.3 million L'Oreal shares held by Nestle, will be paid in cash for 3.4 billion euros. In a separate statement, Nestle said it would use the cash proceeds to launch a share buy back,without disclosing details.

(Read more: Coffee connoisseurs boost high-end market)

The price per L'Oreal share retained for this transaction is 124.48 euros, corresponding to the average of its closing prices between Nov. 11, 2013 and Feb. 10, 2014.

All the shares bought back by L'Oréal will be cancelled.

In order to reflect the change of Nestle's stake in L'Oreal's governance, the number of Nestle representatives on L'Oreal's board of directors will be cut from three to two directors.

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