Senin, 25 September 2017

A French soap opera is about to unfold



The world's richest woman just died. If you didn't know this, please stop focusing on the tweets and turn your attention to more weighty matters of the world.

Liliane Bettencourt passed away four days ago at the age of 94. She was the heiress to the founder of L'Oréal, the world's largest cosmetic company; the only child of Eugène Schueller who founded L'Oréal in 1907. She herself worked in the company from the age of 15 and rose to become its deputy Chairperson.

The future of L'Oréal is now in play. And therein lies a story that could give a beating to any soap opera on television.

In 1974, fearing that France would nationalise the company, Bettencourt did a deal with Nestle wherein she offloaded about half her holding in exchange for shares in Nestle. Since then Nestle and Bettencourt have had one of the longest tangos in business history. Nestle, a food company, with no presence at all in cosmetics, had a 30% stake in the world's largest cosmetics company (now down to 23%). But in an agreement with Bettencourt, Nestle remained a sleeping partner and promised not to acquire any more shares or to bid for Bettencourt's own shares as long as she was alive. Presumably Nestle had thought that she would not live so long. But they kept their word and until now have not interfered at all in the business just pocketing the dividends and biding their time. So much so that very few outside the business world probably even know that Nestle is a major shareholder in L'Oréal.

In the meantime Bettencourt's life over the last decade has been another soap opera all by itself. Sometime in 2007, at the  ripe age of 84, she took a fancy to her photographer and started to bestow gifts to him worth over €1 billion. Her daughter filed a complaint with the police that her photographer was taking advantage of her weakened psychological stake to amass a personal fortune. She and her daughter had an extremely public spat with each accusing the other of having gone mad. The courts finally made Bettencourt's grandson as her overseer and the fortune was vested with her daughter and her two grandsons. But everything was in a state of limbo as long as she was alive.

Cue the events in Nestle. Nestle , for long, has waited patiently to consummate what was really a delayed acquisition. Both the last two Chairmen of Nestle sit on the L'Oréal Board. They were probably waiting for the death of Bettencourt to acquire L'Oréal . But alas they now have an activist shareholder in Dan Loeb who has a fair stake in Nestle and is pushing it to do the opposite - sell the stake in L'Oréal and return the money to shareholders. So there is no saying what Nestle will ultimately do - acquire L'Oréal or divest !

There are other big fish circling. Given how cheap debt is , there are enough and more funds of various stripes, including probably the notorious 3G Capital and their close friend Warren Buffet, who are getting all excited. Also interested would be two giants in the cosmetics field - Unilever and Procter & Gamble, who have long eyed Nestle's stake with envy and made noises about what a Foods company is doing with a stake in a Cosmetics company.

Complicating this will be nationalism, for after all L'Oréal is (very) French. Would Macron be willing to let a French institution fall into the hands of the ugly Americans ? If he interfered, the tweeter in chief would surely have something to say !!

And what will Françoise Bettencourt Meyers, Liliane's daughter and the two grandchildren to whom the 30% stake in L'Oréal passes, do ?  Would they act in concert. Or would they go their own ways ? Would they buy ? Or sell ?

Every investment banker is drooling and shivering with anticipation. It is fair to assume that no first class seats are available on all flights to and from Paris, London, New York and Lausanne !

Watch this space. The knives will be out on 18th March when the six months period after Bettencourt's death ends and  all agreements expire.    Bettencourt's life was colourful to say the least - marrying a Nazi sympathiser, losing money with Bernie Madoff,  a strange affair with her photographer, being declared mentally incompetent, accused of giving cash stuffed envelopes to Nicolas Sarkozy,  having numerous Swiss bank accounts ...... But even by those standards, what will follow in the fight for L'Oréal will be, to put it mildly, interesting.
Disqus Comments