I want to be your friend, too
It was in 1974 that the family that controlled L’Oréal invited Nestlé to take an indirect holding in the firm. The Bettencourts feared that François Mitterrand, then presidential candidate for France’s Socialist Party, might otherwise nationalise the firm if he was elected.
This defensive move proved to be unnecessary. But as a result, 35 years on, the Swiss food giant may now be poised to seize control of L’Oréal, the world’s biggest cosmetics firm with a turnover of EUR 17.5 billion in 2008.
In 2004 Nestlé tightened its grip in a new deal with the Bettencourts: it now owns 30 percent of L’Oréal’s shares directly, and the family has 31 percent.
In 2008, Nestlé’s consolidated sales amounted to CHF 109.9 billion (EUR 74 billion), an increase of 2.2 percent compared to the previous year. The group’s food and beverages business, with sales of CHF 102.4 billion, was the main contributor to growth, achieving organic growth of 8.2 percent. The group’s EBIT grew to CHF 15.7 billion (EUR 10.6 billion), resulting in an EBIT margin of 14.3 percent, up 30 basis points. Nestlé Waters was the only division to witness a decline in sales: -1.6 percent to CHF 9.6 billion. The EBIT margin was 6 percent, down 220 basis points.
In April this year, both sides will be allowed to sell their shares for the first time since 2004, so Nestlé’s intentions may soon become clear. Shareholders in Nestlé are keen to know whether it will increase its stake in L’Oréal.
Adding to the speculation is a vicious family row between Liliane Bettencourt, the daughter of L’Oréal’s founder and the world’s richest woman, whose fortune has been estimated at USD 23 billion by Forbes, and her daughter, Françoise Bettencourt Meyers, 55, who will inherit her stake in L’Oréal.
In December 2008, Ms Bettencourt Meyers filed for "abuse of weakness" – a charge that intimates that the recipient of the money and gift cashed in on her mother’s failing mental faculties.
However, perhaps the whole transaction went like this.
“Oh, Liliane”, says the dapper photographer, “tu es très jolie and très gentile to take me to this très cher restaurant ‘ere in beau Paris. Mais, wouldn’t it be nice if I had one of these large SUVs and took you for a ride to Deauville pour un dinner très intime?”
Upon which Liliane, who has probably never bought a car herself in her whole life, whips out her cheque book and says: “Cheri, mais oui, that is très sweet of you. But will one billion buy you nice leather seats too?”
Good ol’ Liliane may be a bit funny in the head – or not too good with figures, I mean what’s a naught here or there – but she certainly does not deserve to be spoken of in the media as if she were dead yet. It is more than bad taste to divide up the bear skin before you’ve killed the bear. So to speak.
For the time being, Nestlé is prevented from increasing its stake in L’Oréal: neither Nestlé nor the Bettencourt family may buy shares until six months after the death of Ms Bettencourt, 86. But it may be in Nestlé’s interest to amend the 2004 agreement and pre-empt matters if it wants to buy.
At Nestlé’s full year results presentation on 19 February, the board underlined that it would stick to the existing contract not to increase its stake in L’Oréal until six months after Ms Bettencourt’s death.
May Mrs Bettencourt enjoy a long life.
In case Nestlé wants to speed matters up a bit, may I suggest that Nestlé went round looking for worthy individuals to befriend Ms Bettencourt. At the rate of one billion euro-presents per friend, it only takes a two dozen people to leave her financial affairs in dire straights. That’s when she would have to approach Nestlé to help her out.
I think, if pushed, I could pull off this feat.
