Death of Liliane Bettencourt Sparks Speculation Over L’Oreal

Billionaire Liliane Bettencourt’s death has sparked speculation over the ownership of the French cosmetic company L’Oreal.

The Bettencourt’s were the founding family and the death of the French matriarch of that family has caused speculation over the future of the largest cosmetics companies in world and the relationship it has with Nestle, one of its shareholders.

The billionaire was listed as the richest woman in the world by Forbes and she died at 94 said her daughter late Thursday.

The Bettencourt family has a 33% stake in L’Oreal. Daughter Francoise Bettencourt-Meyers, who is on the board of L’Oreal along with her son, announced that the family was committed to L’Oreal and the management team it currently has.

However, Bettencourt’s death may ultimately trigger change in the structure of ownership in the business, that Nestle has been a major investor for more than 40 years and has a current stake of approximately 23%.

One analyst said that speculation is now going to inevitably be re-ignited around the intentions of Nestle toward its stake in L’Oreal.

One analyst said this might mean the L’Oreal will either buy the stake or the possibility of Nestle buying the cosmetic company outright.

The thought of change sent shares of L’Oreal up by 4% in early European trading, making it France’s best performer on its CAC-40 benchmark index.

Nestle agreed with the Bettencourt family that both parties could not take more of a stake during the lifetime of Liliane Bettencourt and for a minimum of six months following her death.

A spokesperson for Nestle said the company expressed its deepest sympathy and sincere condolences to the Bettencourt family and to all of L’Oreal during this difficult period.

Questions over the investment of Nestle with L’Oreal, which is worth $27.6 billion prior to the increase on Friday, have intensified due to Third Point an activist shareholder disclosing a Nestle stake in June and urging the food group to sell its stake down, which represents over 10% of its market value.

Third Point announced that it could be divested in way that was tax-efficient through an offer of exchange where Nestle would give it shareholders, L’Oreal shares in exchange for their shares of Nestle.

That would help the return on equity of Nestle and would increase its share price over the long run, said Third Point, as earnings would improve over a lower number of shares.

L’Oreal is looked at by analysts as willing and able to buy out the stake Nestle holds, and could use its 9% in Sanofi, worth approximately €9.5 billion to fund the purchase.