Nestle is contempleting if its acquisition of L'Oreal SA is worth the investment. This comes as the expiration date of restrictions for the sale of the acquired 29.4% shareholdings draws near. The food and beverage conglomerate is keeping all its options open, which may include the increase of the shareholdings.
The increase was predicted by Natixis analyst Pierre Tegner but this is one option many analysts and investors are discounting that would occur. Should that occur, it would propel Nestle to become the 'indisputable worldwide leader in consumer staples. Tegner added, "It would be a good way of leveraging this very profitable investment."
The expansion of interest would also allow Nestle to go beyond food and beverages, as sales growth had declined in the past year. On the other hand, L'Oreal had reported an above estimate 7.7% increase in its first half earnings from increased sales coming from emerging markets.
The majority of analysts though predict the Vevey, Switzerland based conglomerate would sell the L'Oreal share and earn about EUR22.4 billion. Another scenario would be Nestle retaining the beauty products shareholdings as this accounts for 10% of the company's net income.
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