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L'Oreal advances on prospect of sale of Nestle's holding

[PARIS] L'Oreal SA 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.

While Nestle could have sold its 23 per cent stake in L'Oreal before Bettencourt's death Wednesday, her passing may make a sale to the French company more likely, according to analysts.

The stake is worth about 23.8 billion euros (S$38.31 billion) at the current share price. Another possibility is that L'Oreal attracts a takeover bid.

"Speculation will now inevitably be reignited around Nestle's intentions towards its L'Oreal stake," Martin Deboo, an analyst at Jefferies, said in a report. 

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"Much will depend on the intentions of the Bettencourt enfants."

L'Oreal climbed 4.1 per cent to 183.80 euros at 10.02am in Paris after rising as much as 6.7 per cent earlier.

Nestle has faced calls to sell its stake in L'Oreal, most recently from activist shareholder Dan Loeb, who revealed a stake of about 1.3 per cent in the Swiss food company in June.

Nestle chief executive officer Mark Schneider told Bloomberg Television in February that the L'Oreal stake is "highly strategic" and there is no short-term urgency to alter the relationship.

L'Oreal could sell its 9.4 per cent stake in French drugmaker Sanofi to finance a repurchase of Nestle's stake, according to Pierre Tegner, an analyst at Natixis.

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