What's Next For L'Oreal After The Death Of Billionaire Liliane Bettencourt?

Liliane Bettencourt, the world's richest woman and heiress to the conglomerate giant L'Oreal SA (ADR) 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) 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) SNY, which it can divest to raise capital.

Whatever direction L'Oreal heads in, it's a "nicer problem to have," Felsted concluded.

Related Links:

Assessing The Eligible Suitors For Estee Lauder If Acquisition Rumors Are True

Fearing Soft Sector Trends, Ulta Beauty Shares Downgraded ______ 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 Commons