Explanatory statement
The Annual General Meeting is asked to vote on an agreement falling within the scope of Articles L. 225-38 et seq. of the French Commercial Code concerning the Company’s acquisition of L’Oréal shares from Nestlé.
This agreement was signed on 7 December 2021 following the authorisation of the Board of Directors, and concerns the buyback from Nestlé of 22,260,000 L’Oréal shares, representing 4% of its capital and voting rights as at 30 November 2021. The unit price per L’Oréal share bought back is €400, for a total price of €8,904,000,000.
This agreement was entered into in the following context.
On 5 November 2021, the Board of Directors of L’Oréal decided, on the recommendation of a ad hoc committee, with a majority composed of independent Directors, to voluntarily designate the Ledouble firm represented by Ms Agnès Piniot as an independent expert.
The independent expert concluded that from a financial standpoint, the buyback price was fair for the Company and its shareholders, that the transaction would not affect the financial balance and the investment capacity of the Company and that the transaction, carried in the Company’s interest, would be accretive for its shareholders and treated as a related-party transaction. The ad hoc committee reported the expert’s work to the Board of Directors and presented its recommendations to the Board.
At its meeting of 7 December 2021 and pursuant to the provisions of Article L. 225-38 of the French Commercial Code, the Board of Directors, after reviewing the findings of the independent expert’s report, authorised the conclusion of a share repurchase agreement between L’Oréal and Nestlé; the Directors having an interest did not participate in the deliberations or in the vote(1).
Nestlé, which holds a proportion of L’Oréal voting rights greater than 10% and which signed the repurchase agreement with L’Oréal, is considered to be an interested party within the meaning of the applicable regulation.
Mr Paul Bulcke did not participate in the deliberations and vote of the Board of Directors given that he is a Director of both L’Oréal and Nestlé and is, therefore, considered to be an interested party. Ms Béatrice Guillaume-Grabisch, a Nestlé employee, did not participate in the deliberations and vote because of a potential conflict of interest within the meaning of the AFEP-MEDEF Code and the Internal Rules of the Board of Directors.
The share repurchase transaction was carried out, pursuant to the sixteenth resolution approved by the Annual General Meeting of 20 April 2021, via the acquisition of an off-market block. The shares bought back were cancelled on 10 February 2022 by decision of the Board of Directors on 9 February 2022.
The buyback was funded using €4.5 billion in available cash from L’Oréal and through bank financing for the balance.
This transaction with Nestlé constitutes a further strategic step in strengthening L’Oréal’s shareholder stability, in the interests of the Company and of all its shareholders.
The transaction helps optimise 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.
Inasmuch as this agreement falls within the scope of Article L. 225-38 of the French Commercial Code, it is subject to the approval of the Annual General Meeting.
The Annual General Meeting, voting in accordance with the quorum and majority conditions required for Ordinary General Meetings, having reviewed the Special Report of the Statutory Auditors on the agreements covered by Articles L. 225-38 et seq. of the French Commercial Code, approves the agreement mentioned therein regarding the Company’s repurchase of a block of 22,260,000 L’Oréal shares held by Nestlé.
(1) Moreover, Ms Françoise Bettencourt Meyers, Mr Jean-Victor Meyers and Mr Nicolas Meyers did not attend the meetings of the Board of Directors and, as a result, did not participate in discussions or votes on any deliberation concerning this share repurchase transaction followed by cancellation of the shares.
