L’Oréal Shareholder Reorganization To Simplify Ownership Structure
This article was originally published in The Rose Sheet
Executive Summary
L'Oréal announced a majority shareholder restructuring initiative Feb. 3 that will simplify ownership of the company, while strengthening its 30-year relationship with Nestle
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L'Oréal announced a majority shareholder restructuring initiative Feb. 3 that will simplify ownership of the company, while strengthening its 30-year relationship with Nestle. The French beauty manufacturer is currently majority owned by Gesparal, a holding company controlled by Nestle (49%) and Liliane Bettencourt and her family (51%). Gesparal owns 53.8% of the capital and 71.7% of the voting rights of L'Oréal, but the new agreement calls for the absorption of Gesparal by L'Oréal and the elimination of double voting rights. Following L'Oréal's absorption of Gesparal, the Bettencourt family will hold 27.5% of L'Oréal's capital and Nestle, 26.4%. The position of minority shareholders will be strengthened, representing collectively 48% of the company rather than 28%, Chairman and CEO Lindsay Owen-Jones stated during a same-day call. "This agreement represents in a more modern form a continuation of the stability that we have enjoyed in the shareholding structure of the company," he said. The agreement preserves L'Oréal's relationship with Nestle and has sparked speculation it could facilitate a takeover by the Swiss food manufacturer in the long-term. The current structure, however, will remain in the short-term. Both the Bettencourt family and Nestle have agreed not to increase their respective shares during the lifetime of Mrs. Bettencourt or for at least three years. If there should be a public tender offer for L'Oréal shares by a third party, the family and Nestle would have the right to tender their shares or make a counter-offer. Otherwise both parties have agreed to keep all of their shares for a period of five years. The agreement also will require L'Oréal's board of directors to create a committee for strategy and implementation, including six members: L'Oréal's CEO, two Bettencourt appointees, two Nestle appointees and one independent board member. The plan is subject to the approval of the French authorities and L'Oréal shareholders. L'Oréal and Nestle are involved in joint ventures including Galderma Labs Rx dermatologicals business and an initiative to market dietary supplements with cosmetic benefits (1 (Also see "L’Oréal/Nestle Cosmetic Supplements To Launch In 2003" - HBW Insight, 1 Jul, 2002.), p. 7). |