By Sarah White and Dominique Vidalon
PARIS (Reuters) - L'Oreal (PA:OREP) signalled its readiness to buy Nestle's (S:NESN) 23 percent stake in the world's biggest cosmetics firm on Friday, which along with strong results lifted the French company's shares.
L'Oreal said it could finance a purchase of the holding, which is now worth around 22.3 billion euros (19.64 billion pounds), with cash, by selling its stake in French pharmaceutical group Sanofi (PA:SASY) or through borrowing.
"If Nestle one day wants to sell, we are ready," Chairman and Chief Executive Jean-Paul Agon said after L'Oreal released fourth-quarter earnings.
Billionaire Liliane Bettencourt's death in September has focused attention on how L'Oreal's founding family and its major shareholder Swiss food group Nestle would manage their stakes.
Investor Daniel Loeb, founder of hedge fund Third Point, has pushed for Nestle to sell its L'Oreal stake among his demands for the Swiss firm to speed a strategy overhaul.
"We have 1.8 billion euros in cash, we have the Sanofi stake. We are also a very serious and loyal and active shareholder in Sanofi, but in case we will be ready and I'm sure if it was not enough, we have many love letters from banks that have said that they would love to lend us some money." he added.
Nestle and Sanofi declined to comment.
STATUS QUO
Shares in L'Oreal, whose brand ambassadors include Helen Mirren, Eva Longoria and Blake Lively, were up 2.4 percent at 1109 GMT, among the top gainers on France's blue-chip CAC-40 (FCHI) index. Nestle shares were up 1.1 percent, while Sanofi was 0.7 percent lower.
"Scarcely a surprise, but this may excite some: an acquisition of the stake by L'Oreal, part-funded by a sale of its own Sanofi stake would be circa 10 percent accretive," Investec Securities analysts said in a note.
At today's stock price, L'Oreal's 9 percent stake in Sanofi is worth more than 7 billion euros, according to Reuters data.
L'Oreal entered the pharmaceuticals business in 1973 with the purchase of Synthelabo. This was later merged with Elf Aquitaine's drugs business in the late 1990s, with L'Oreal retaining a stake in the enlarged Sanofi group.
"We see this as no change to the status quo from a L’Oreal perspective. Nor do we expect an imminent about-turn from Nestle, which reiterated its commitment to the L’Oreal holding in September," Barclays (LON:BARC) analysts wrote.
L'Oreal's Agon said on Thursday he was confident of significant growth in like-for-like sales in 2018.