Investing.com -- L'Oreal (EPA:OR) stock pared back some of its early losses on Monday after announcing the sale of 29.6 million shares of its stake in pharmaceutical company Sanofi (EPA:SASY) (NASDAQ:SNY) (EPA:SAN), amounting to €3 billion.
This strategic move is aimed at optimizing L'Oreal's balance sheet and will reduce its shareholding in Sanofi to 7.2% from the previous 9.4%.
The transaction coincides with Sanofi's initiation of a €5 billion share buyback program, which is intended to counteract the dilution expected from the divestment of its Opella Consumer divisions by mid-2025.
According to investment firm Jefferies, L'Oreal's sell-down of Sanofi shares could provide the company with additional financial flexibility for future endeavors.
Jefferies further speculates on the potential uses of the newly acquired funds: "We think this transaction may also lead to scope to facilitate further spending, e.g.: 1) a NESN sell-down - where we have assumed Nestle (NSE:NEST) sells down 4ppt of its 20.1% stake in OR FP in a recent note, which we estimate is roughly 2% accretive to OR, or, 2) further large acquisitions (for example, we note the 10% stake in Galderma in August 2024)."
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