Nestl sells 8% stake in L'Oral for $9.8B

Swiss food group Nestl is selling an eight per cent stake in L'Oral back to the French cosmetics firm for 6.5 billion euros ($9.8 billion Cdn).

Nestl, maker of Kit Kat and Gerber baby food, and the Bettencourt family have owned nearly equal stakes in L'Oral since 1974, when L'Oralowner LilianeBettencourt sought an outside investor because she feared a nationalization of the company.

But Nestlis in the midst of a drive to sell underperforming businesses and refocus on nutrition, health and wellness.

It will still own 23 per cent of L'Oralafter the sale, and many marketwatchers had expected it to sell off more of its stake.

However, Nestlchairman Peter Brabeck-Letmathe told reporters on Tuesday that hisfirm planned to stay a major investor in the maker of Lancome,Garnier andLa Roche-Posaybrandbeauty products, among many others.

"I do not see this as a first step of leaving L'Oral ... not at all," he said. "We are in here for the long haul."

Nestl acquiresGalderma

L'Oral is paying for its stake in part by selling its half of the skin-care firm Galderma, a joint venture withNestl, to its Swiss partner. The deal will addacne and skin-cancer treatments to Nestl's health care product line, which fitsinto its new strategic direction.

"The future of skin health and dermatology is a buoyant market globally," Nestl CEO Paul Bulcke said.

L'Oralsaid it will buy back 48.5 million of its own shares and then cancel them. The deal does not include the sale of its nineper cent stake in drugmaker Sanofi, worth $12 billion, as many traders had expected.

Nestl and the Bettencourt family have promised not to sell their stakes without first offering them to the other. The number of seats Nestl holds on the L'Oral board drops from three to two as a result of the deal.