L’Oreal SA, the world’s biggest purveyor of cosmetic products, saw shares spike nearly 5 percent on Friday as a result of the announcement that the company would be making a bid to repurchase its own shares from the Swiss food company Nestle.
The stock’s momentum was bolstered by L’Oreal’s release of its half-year income statement on Thursday evening. On the strength of better than expected sales, the company saw net earnings up over 5 percent to $2.25 billion. Furthermore, L’Oreal reasserted its targets for the rest of 2013, and expects sales growth to continue apace.
Nestle, for its part, holds a 29 percent stake in the company, which could cost L’Oreal some €22 billion, or just over $29 billion. For the time being, an actual deal is still a matter of speculation, however. Company CEO Paul Agan said in an interview Friday that the company might indeed consider the repurchase, but seemed to step back from those comments later in the day, reiterating that “we have significant financial resources since we have a positive cash flow and 9.0 percent in Sanofi.”
The news is significant for the drug-maker Sanofi (SNY) , as L’Oreal could sell the company in order to fund the share buyback. Sanofi is a world-wide developer and manufacturer of a variety of pharmaceutical treatments for afflictions from thrombosis to cancer. The French company dropped over 2 percent to $48 on NYSE ahead of the closing bell on Friday.
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