Switzerland’s Nestlé SA announced it will cut its stake in L’Oréal from 23.3% to to 20.1% by selling shares worth €8.9 billion back to the French cosmetics brand.

Nestlé also said its board had decided to buy back more than €19 billion worth of its shares between 2022 and 2024 — adding that it would adjust this program should it make sizable acquisitions.

Vontobel analyst Jean-Philippe Bertschy wrote: “Nestlé is using all levers to create value for shareholders.

“The proposed transaction is clever, allowing Nestlé to keep all opportunities with regard to M&A and returns of cash to shareholders.”

L’Oréal said its board of directors unanimously approved the repurchase of 22.26 million of its own shares — representing 4% of its capital — from Nestlé.

“Nestlé has agreed to sell 22.26 million of L’Oréal shares to L’Oréal for EUR 400.00 per share with a total consideration of EUR 8.9 billion (CHF 9.3 billion),” said Nestlé.

“L’Oréal will cancel the repurchased shares.

“Following the transaction, Nestlé will own 20.1% of L’Oréal and remains fully supportive of the company’s value creation strategy.

“Nestlé will retain its two positions on the L’Oréal board of directors.

“The Nestlé board of directors has decided to replace the existing share buyback program with a new plan which is expected to commence on January 3, 2022.

“Under this new program Nestlé plans to repurchase CHF 20 billion of its shares over the period 2022 to 2024.

“The company expects to buy around CHF 10 billion of shares in the first twelve months. The new program is subject to the necessary regulatory approvals.

“Consequently, the company’s existing share buyback program is expected to terminate on December 31, 2021.

“As at December 7, 2021, Nestlé has repurchased 120,289,800 of its shares for a total amount of CHF 12.7 billion at an average price of CHF 105.61 per share, almost two thirds of the anticipated CHF 20 billion existing program volume.

“The board of directors and executive management of Nestlé confirm their commitment to investing behind the company’s core food, beverage and nutritional health businesses.

“Should any sizable acquisitions take place, the new share buyback program commencing January 3, 2022 will be adjusted accordingly.

“The volume of monthly share buybacks will depend on market conditions.”

L’Oréal’s said: “All the shares repurchased by L’Oréal will be exclusively purchased for cancellation purposes and will be cancelled, at the latest on August 29, 2022.

“At the end of the transaction and after cancellation of the repurchased shares, Nestlé’s stake in the capital of L’Oréal will be reduced from 23.3% to 20.1%.

“All other shareholders will benefit from an accretive effect by the same proportion, including the Bettencourt Meyers family, whose stake in L’Oréal will increase from 33.3% to 34.7%.

“The Autorité des Marchés Financiers has granted a waiver to the Bettencourt Meyers family to the obligation to file a mandatory public offer on account of the crossing of the threshold of one third of the capital and voting rights of the company.

“The board members related to Nestlé and to the Bettencourt Meyers family did not participate in the deliberations nor the votes of the board of directors relating to this transaction.

“The composition of the board of directors will remain unchanged.

“The transaction will help optimize L’Oréal’s balance sheet benefitting from excellent financing conditions, while retaining a significant financial flexibility to ensure the group’s future development.

“The transaction will also have an accretive effect on L’Oréal’s earnings per share of more than 4% in a full year.

“The share buyback will be financed in a balanced manner by the group’s available cash on the one hand, and new debt on the other.”