French cosmetics giant L'Oreal has the resources to buy back the 23 billion euro ($30 billion) stake Nestle holds in it, the company's boss said on Friday, though he steered clear of pledging such a move.
Speculation that L'Oreal could repurchase Nestle's holding once the Swiss food company is free to sell next April helped lift its shares as much as 6 percent. The move would allow the Paris-based group to secure its independence.
"The stock is somewhat inflated by hope, expectation that Nestle will sell its stake in L'Oreal and that L'Oreal will undertake a mega buy-back of the shares, which would be significantly accretive," Bernstein analyst Andrew Wood said.
At a press conference on Friday L'Oreal Chief Executive Jean-Paul Agon sought to clarify comments made earlier to Les Echos newspaper, which quoted him as saying all options were on the table.
"I didn't say that we wished to buy Nestle's holding," Agon said. "I simply said that we had significant financial resources because we have positive cash flow and the 9 percent of Sanofi."
L'Oreal's 9 percent holding in Sanofi is significant. The drugmaker is France's second-biggest company, with a market value of close to 100 billion euros. L'Oreal had net cash of 572 million on its balance sheet at the end of June.
Agon reiterated that L'Oreal could sell the Sanofi stake to help fund acquisitions.
"The cash is there to use," he said. "We will see if the opportunities are there to use it. We have always said that our stake in Sanofi is financial and not strategic so therefore we could use it if an opportunity presented itself."
Agon was presenting the company's results for the first half, which saw improved margins and a nearly 8 percent rise in first-half operating profit.
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