Nestlé launches new skincare business

Swiss-based food giant Nestlé is launching a new skincare business while reducing its stake in L’Oréal, the world’s largest cosmetics firm, in a deal announced by the two companies on Tuesday and valued at €6.5 billion.

Nestlé launches new skincare business
Nestlé headquarters building in Vevey. Photo: Nestlé

L’Oréal will buy back 48.5 million of its shares held by Nestlé, headquartered in Vevey in the canton of Vaud, the companies said.

French-based L'Oréal, controlled by the Bettencourt Meyers family, will finance the buyback through the sale of its 50 percent stake in Galderma, a Swiss skincare company, valued at €3.1 billion and through €3.4 billion in cash.

The shares bought back by L’Oréal will be cancelled thereby reducing Nestlé’s stake in L’Oréal to 23.29 from 29.4 percent.

Nestlé also announced as part of the deal that it will be setting up a new skin health business in connection with its acquisition of half of Galderma’s shares.

The new wholly-owned subsidiary will “offer a broad range of innovative and scientifically-proven products,” the company said on its website.

Nestlé is pursuing its “strategic development in nutrition, health and wellness by expanding its activities to medical skin treatments,” company chairman Peter Brabeck-Letmathe said in a statement.

Galderma’s management will run the new entity, Brabeck-Letmathe said.

Although Nestle is reducing its ownership in L’Oréal it “will continue to support” the cosmetics firm as it has for the past 40 years.

Jean-Paul Agon, chairman and CEO of L’Oréal, said the transaction was a “positive strategic move” for his company, which he said would benefit shareholders.

L’Oréal plans to focus “exclusively on its cosmetics business,” he said, with a goal of winning one billion new consumers.

Nestlé three years ago began to talk about its role in L’Oréal and the possibility of reducing its stake.

The company earlier sold investments in hotels, wine and fast food to focus on its “global nutrition, health and wellness strategy”.

In line with this, it recently established Nestlé Health Science and Nestlé Institute of Health Sciences.

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