(Annual General Meeting held to approve the financial statements for the year ended 31 December 2021)
This is a translation into English of the statutory auditors’ report on regulated agreements issued in French and it is provided solely for the convenience of English speaking users. This report should be read in conjunction with, and construed in accordance with French law and professional auditing standards applicable in France. It should be understood that the agreements reported on are only those provided for by the French Commercial Code and that the report does not apply to those related-party transactions described in IAS 24 or other equivalent accounting standards.
L'Oréal
14, rue Royale
75008 Paris
To the L’Oréal Annual General Meeting,
In our capacity as Statutory Auditors of your Company, we hereby report to you on regulated agreements.
The terms of our engagement require us to communicate to you, based on information provided to us, the principal terms and conditions of those agreements brought to our attention or which we may have discovered during the course of our audit,as well as the reasons justifying that such agreements are in the Company’s interest, without expressing an opinion on their usefulness and appropriateness or identifying other such agreements, if any. It is your responsibility, pursuant to Article R.225-31 of the French Commercial Code (Code de commerce), to assess the interest involved in respect of the conclusion of these agreements for the purpose of approving them.
Our role is also to provide you with the information stipulated in Article R.225-31 of the French Commercial Code relating to the implementation during the past year of agreements previously approved by the Annual General Meeting, if any.
We conducted the procedures we deemed necessary in accordance with the professional guidelines of the French National Institute of Statutory Auditors (Compagnie nationale des commissaires aux comptes) relating to this engagement. These procedures consisted in agreeing the information provided to us with the relevant source documents.
Pursuant to Article L.225-40 of the French Commercial Code, the following agreement entered into during the year and previously authorized by the Board of Directors, has been brought to our attention.
On 5 November 2021, your Board of Directors decided, at the recommendation of a special committee mostly comprising independent directors, to voluntarily appoint Cabinet Le double as independent expert in connection with the planned buyback of its own shares held by Nestlé.
The independent expert concluded that, from a financial perspective, the buyback price was fair for your Company and its shareholders, the transaction would not affect L’Oréal’s financial balances and investment capacity and the transaction conducted in your Company’s interest would be accretive for its shareholders and accounted for as a regulated agreement. The special committee reported on the expert’s work and submitted its recommendations to the Board.
On 7 December 2021, your Board of Directors, having familiarized itself with the conclusions of the independent expert’s report and the special committee’s recommendations, unanimously authorized the conclusion, between your Company and Nestlé, of a L’Oréal share buyback agreement. The directors concerned did not take part in either the deliberations or the vote(1).
This agreement, concluded at the close of the Board of Directors’ meeting of 7 December 2021, involved the buyback from Nestlé of 22,260,000 L’Oréal shares representing 4% of its share capital and voting rights as of 30 November 2021. The unit price of each repurchased L’Oréal share was €400, representing a total price paid of €8,904,000,000.
The share buyback transaction was performed under the 16th resolution voted by the Combined Annual General Meeting of 20 April 2021, via an off-market block purchase, financed by L’Oréal’s available cash in the amount of €4.5 billion and bank loans for the remainder.
On 15 December 2021, the repurchased shares were earmarked for cancellation. On 9 February 2022, your Board of Directors canceled, with effect as of 10 February 2022, the 22,260,000 L’Oréal shares pursuant to the Board of Directors’ decisions of 7 December 2021.
Your Board of Directors considered that this transaction with Nestlé represented a new strategic phase in boosting the stability of L’Oréal’s shareholding structure, in the interest of your Company and all its shareholders, since it will help optimize your Company’s balance sheet by benefiting from excellent financing conditions and maintaining substantial financial leeway to secure the Group’s future development. Furthermore, your Board of Directors deemed that the transaction will also have a full-year accretive impact of over 4% on L’Oréal net earnings per share.
Pursuant to Article R.225-30 of the French Commercial Code, we have been informed that the following agreement, previously approved by Annual General Meetings of prior years, has remained in force during the year.
(1) Furthermore, Françoise Bettencourt Meyers, Jean-Victor Meyers and Nicolas Meyers did not attend the Board of Directors’ meetings and therefore did not take part in the discussions and voting of any deliberations on this buyback of shares and their subsequent cancellation.
