Liliane Bettencourt, the world's richest woman and heiress to the conglomerate giant L'Oreal SA (ADR) (OTC: LRLCY), passed away Thursday at the age of 94. This raises the question
of what will come next for the France-based L'Oreal; Bettencourt's family owns a 33 percent stake in L'Oreal while Nestle SA
(ADR) (OTC: NSRGY) holds a 23 percent stake.
A long-standing agreement between the Bettencourt family and Nestle where Nestle can't increase its stake in L'Oreal will now
expire in six months. As such, Nestle would be free to fully acquire L'Oreal, but on the other hand, the death of Bettencourt could
prompt Nestle to completely exit its stake.
While the agreement between the two parties did allow Nestle to sell its stake to a third party since 2014, the death of
Bettencourt could change Nestle's approach to L'Oreal, Gadfly's Andrea Felsted
commented. Specifically, activist investor Dan Loeb and his firm Third Point own a $3.5
billion stake in Nestle and would likely be happy to see the company divest its ownership in L'Oreal, which is worth around 24
billion euros.
Ironically, the Bettencourt family could in fact emerge as a potential buyer of Nestle's stake, Felsted noted. L'Oreal could
also buy back up to 10 billion euros worth of its own company and can easily afford to do so given its lack of any debt on the
balance sheet and a 9 percent stake in Sanofi SA (ADR) (NYSE: SNY), which it can divest to raise capital.
Whatever direction L'Oreal heads in, it's a "nicer problem to have," Felsted concluded.
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Image Credit: By Metropolitan Transportation Authority of the State of New York - L'Oreal Paris Intelligent Color
Experience.Uploaded by tm, CC BY 2.0, via Wikimedia
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