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Speculation rises on Nestlé's stake in L'Oréal

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Speculation rises on Nestlé's stake in L'Oréal
Photo: AFP
13:14 CEST+02:00
Shares in French firm L'Oréal surged by 4.6 percent on Friday on news that the group, the world's top cosmetics company, may be looking to buy back Swiss food giant Nestlé's holding.

The stock rose to 128.05 euros in midday deals on the Paris stock exchange which showed an overall loss of 0.63 percent.
   
The rally also comes on the heels of L'Oréal's six-month earnings report 
which was released after the market closed on Thursday.
   
For the six months ending 
June 30, L'Oréal's said its net profit rose 5.2 percent to 1.7 billion euros ($2.25 billion), thanks largely to strong sales.
   
"The results are broadly in line with expectations, but the share should 
mainly react on the announcement of the group" regarding Nestle's stake in
L'Oréal, Aurel BGC strategist Fabien Laurenceau said.
   
In an interview published in newspaper Les Echos 
on Friday, L'Oréal chief executive Jean-Paul Agon referred to market discussion about whether Auchan might consider buying Nestlé's 29.3-percent stake in the group.
   
"We have the resources to allow us to consider all types of opportunities," he was quoted as saying.


"For us, all options are on the table."
 

This fuelled market speculation after Nestle's chairman Peter Brabeck had said on Thursday that the 10-year mutual right of first refusal for the holding would not be extended when it expires next year.
   
Later 
Friday however, Agon distanced himself from the article in Les Echos, telling a press conference "I didn't at all say to Echos that we were ready to, or desired to . . . buy back their (Nestlé's) holding in us".
   
"I just said that we — as everyone knows — have significant financial 
resources since we have a positive cash flow and nine percent in Sanofi — full stop."
   
Les Echos said a potential transaction could be worth up to 22 billion 
euros.
   
In its results for the first half of the year, L'Oréal confirmed its target 
for 2013, saying it was "confident in the group's ability to once again outperform the market, and to achieve a further year of growth in sales, results and profitability".
   
The group recorded a "record" operating profit in the period of around two 
billion euros, amounting to 17.4 percent of sales.

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