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L'Oreal (ORFP; Aa1/AA) est. €1.7b stake taken in a dermatology co

CONSUMER CYCLICALS

Earnings other day was fine and it doesn't have to issue for this - so more of an aside.

  • It's taken a 10% stake in publicly listed Galderma without disclosing size but based on market cap we see stake valued at €1.7b.
  • It will be funded with available cash and credit lines, expected to be completed in coming days. For reference it had €2.7b of cash on hand at the end of June. It is still sizeable given net debt (incl. leases) was only €6.5b but L'Oreal generates north of €6b in FCF/yr (i.e. can delever BS easily).
  • On fundamentals, its unclear what it's plans are; it hasn't pushed for a board seat. Dermatological beauty (17% of group sales) is it's current strongest performer; +16%yoy in 1H and was fuelled by its patented Melasyl molecule product release.
  • Front maturity is the €1b May 25s.

Presser hereand equity takes here

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