L'Oreal generation game poses ownership question (Reuters)

PARIS (Reuters) ? L'Oreal's decision to accept company heiress Liliane Bettencourt's grandson as her successor on the board kept alive speculation that the family could eventually sell its stake in the world's largest cosmetics company.

The French company insisted on Tuesday that the appointment of 25-year-old Jean-Victor Meyers underlines the family's commitment to L'Oreal. But questions remain about the long-term intentions of the Bettencourts and the other key shareholder, Nestle.

The Swiss food group and the Bettencourt family each own around 30 percent of L'Oreal. Liliane Bettencourt, France's richest woman, lost control of her business affairs to daughter Francoise Bettencourt-Meyers in October when a court declared her to be mentally diminished after a bitter legal battle.

Under a 10-year shareholder pact due to expire in 2014, each side has a right of first refusal on the other's stake, while neither can raise its stake during Liliane Bettencourt's lifetime or for six months following her death.

While the 89-year-old daughter of L'Oreal's founder has opposed talks with Nestle, the arrangement has led to repeated speculation that Bettencourt-Meyers could be open to a sale of the stake in the 51 billion-euro ($68 billion) group to Nestle.

"For now it doesn't change anything for L'Oreal, but 2014 will come around quickly," said one Paris-based analyst, adding that he expected the family to keep hold of their shares.

Analysts are split on the family's intentions, while Bettencourt-Meyers has publicly affirmed her support for the group.

Bettencourt-Meyers and her husband Jean-Pierre Meyers hold the family's two other board seats.

L'Oreal Chief Executive Jean-Paul Agon said the shareholder pact between the Bettencourt family and Nestle was unchanged.

"This transition is ... absolutely ideal because it changes nothing regarding the balance of L'Oreal's shareholding structure or the functioning of the board of directors," Agon said. "It's very reassuring for the stability of the company."

The three family directors would continue to vote as a block. Nestle also has three representatives on the board.

L'Oreal's board was informed that Liliane Bettencourt was no longer a director at a meeting on Monday, the first since the court ruling based on medical tests showing she was suffering from a form of dementia.

The judge awarded Bettencourt-Meyers control over the wealth and income of Liliane Bettencourt - estimated at 17 billion euros - while Jean-Victor Meyers was designated to look after her health and physical well-being.

NO SLOWDOWN

L'Oreal announced the replacement of Bettencourt as it posted a 7.7 percent rise in 2011 operating profit and 5.1 percent growth in like-for-like sales.

The group's CEO told a news conference on Tuesday that he expected the global cosmetics market to grow around 4 percent this year and that L'Oreal hoped to outperform it, with both revenue and profits forecast to rise.

The company had so far not seen any signs of a slowdown.

"The cosmetics consumer has not changed their behavior since the crisis," Agon said.

L'Oreal, which had a net cash surplus of 504 million euros at the end of last year, ruled out share buybacks but said it continued to be on the lookout for acquisitions, without giving details.

The shares were up 3.2 percent at 84.24 euros by 1407 GMT, the second-biggest gainer on the French blue-chip CAC 40 index.

(Reporting by James Regan and Pascale Denis; Editing by Christian Plumb, Chris Wickham and Paul Taylor)

Source: http://us.rd.yahoo.com/dailynews/rss/enindustry/*http%3A//news.yahoo.com/s/nm/20120214/media_nm/us_loreal_succession

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