Bettencourt death fuels speculation over L'Oreal future as shares surge

The Bettencourt family has a 33 per cent stake in L'Oreal, while Nestle holds 23 per cent

L'Oreal cosmetics heiress Liliane Bettencourt died at the age of 94 at her home in Paris on Wednesday. Jacques Brinon, AP

L’Oreal shares surged the most in seven years on speculation that the death of the company’s biggest shareholder, Liliane Bettencourt, could clear up the cosmetics maker’s ownership through a takeover or a buyback.

Liliane Bettencourt had the largest stake in the company and her passing may alter the ties between L'Oreal and Nestle.

L'Oreal shares were up around 4 per cent in early trading, the best performer on France's benchmark CAC-40 index and among the top stocks on the pan-European STOXX 600 index.

Ms Bettencourt's family owns 33 per cent of L'Oreal. Her daughter Françoise Bettencourt-Meyers, who sits on L'Oreal's board along with her own son, said in a statement that the family remained committed to L'Oreal and its management team.

Nestle, which owns just over 23 per cent of L'Oreal, had agreed with the founding family that the two parties could not increase their stakes during Liliane Bettencourt's lifetime and for at least six months after her death.

"Speculation will now inevitably be re-ignited around Nestle's intentions towards its L'Orealstake," analysts at Jefferies wrote in a research note.

"This holds out the prospect of L'Oreal either buying in the stake, or perhaps even Nestle buying L'Oreal outright."

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World's richest woman Liliane Bettencourt dies aged 94

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Nestle shares were up 1.1 per cent while shares in health care company Sanofi, in which L'Oreal also has a 9 per cent stake, also advanced by around 1 per cent.

Analysts said that while they did not expect any immediate changes to the relationships between Nestle and L'Oreal, a deal in the longer run could not be ruled out.

L'Oreal could also carry out share buy-backs after Ms Bettencourt's death, as Ms Bettencourt had been unwilling to sell L'Oreal shares during her lifetime, which could also boost the L'Oreal stock price, added the analysts.

"We have recently argued that a major deal at Nestle is not on the cards for now, and the market is currently seeing Nestle as a seller of L'Oréal (after it sold an 8 per cent stake in 2014)," JP Morgan analysts wrote in a note.

"Yet at a time of intense changes and portfolio reshuffling in the industry, a potential takeover of L’Oreal by Nestle cannot be discarded completely, and we believe the market debate around L’Oreal's future with or without Nestle is likely to intensify," added JP Morgan.