By Pierre Bertrand and Andrea Figueras

L'Oreal will sell part of its stake in Sanofi back to the French pharmaceutical company for 3 billion euros ($3.11 billion), bolstering its balance sheet while the beauty industry is undergoing a slowdown.

The deal will diversify the French beauty giant's funding sources and represent a big chunk of Sanofi's 5 billion-euro buyback program set out last week, the companies said Monday.

The maker of Garnier shampoo and Lancome cosmetics products has for decades been one of top shareholders in the different iterations of Sanofi, and analysts have in the past said that selling the stake would allow L'Oreal to fund potential acquisitions or buybacks.

L'Oreal said it would sell a 2.3% stake, or about 29.6 million shares for 101.5 euros each, back to the pharma company. After the sale, L'Oreal will hold 7.2% of Sanofi's share capital and 13.1% of its voting rights.

"We will continue to support the development of Sanofi as a loyal and key shareholder and are confident in the prospects of the company," L'Oreal Chief Financial Officer Christophe Babule said.

The sale will be carried out through an off-market block trade which should be finalized in the coming days, the companies said.

L'Oreal and the broader beauty industry are navigating a period of slower growth, particularly in China.

The sale of the Sanofi shares is expected to help L'Oreal optimize its balance-sheet after recent acquisitions and further diversify the group's financing sources, L'Oreal said.

In August, L'Oreal agreed to buy a minority stake in Swiss skincare company Galderma, strengthening its exposure to the fast-growing market for aesthetic injections such as fillers. The price of the stake wasn't disclosed, but it was valued at 1.59 billion Swiss francs ($1.74 billion) based on Galderma's market capitalization at the time.

The stake purchase in Galderma came roughly a year after the cosmetics giant completed its acquisition of Australian luxury-beauty brand Aesop in a $2.5 billion deal, including debt. The move was aimed at expanding the company's luxury portfolio, which already houses brands including Lancome, Biotherm and Kiehl's.

Write to Pierre Bertrand at pierre.bertrand@wsj.com and to Andrea Figueras at andrea.figueras@wsj.com

(END) Dow Jones Newswires

February 03, 2025 08:04 ET (13:04 GMT)

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