L'Oréal seeks €1.5 billion bond to fund Kering Beauté acquisition

L’Oréal SA is currently in the market to issue a substantial bond offering, aiming to raise at least €1.5 billion ($1.7 billion). This significant financial move is primarily intended to help fund its recent strategic acquisition of Kering Beauté, marking a crucial step in the beauty giant's ongoing expansion.

The bond issuance is structured as a three-part deal to cater to different investor preferences. It includes a two-year floating-rate note, designed to offer flexibility, alongside a five-year fixed-rate note and a longer 10-year fixed-rate bond, providing stability and longer-term investment opportunities for buyers.

The acquisition of Kering Beauté, which L’Oréal agreed to last month, is a major transaction for the company. Under the terms of the deal, the Gucci owner is set to receive €4 billion in cash upon the closing, which is anticipated to occur in the first half of the coming year. Additionally, Kering will benefit from ongoing royalties derived from L’Oréal’s management of the beauty division.

This latest acquisition of Kering Beauté is part of a broader, aggressive growth strategy for L’Oréal, characterized by a series of high-profile deals. In 2023 alone, the beauty conglomerate acquired Aēsop for an enterprise value of approximately $2.5 billion. Other recent strategic investments include the South Korean brand Dr. G, a majority stake in Medik8, and minority stakes in various firms, such as the Omani high-end fragrance maker Amouage.

Specifics regarding the bond pricing indicate competitive terms for investors. The two-year floating-rate note is being offered at 45 basis points over the three-month Euribor. For the fixed-rate tranches, the five-year bond is being marketed in the area of 70-75 basis points over midswaps, while the long 10-year bond carries an indicative yield of 100-105 basis points over midswaps.

Investors can also be reassured by the strong credit ratings expected for these bonds. They are anticipated to be rated Aa1 by Moody’s Ratings and AA by S&P Global Ratings, reflecting a high level of creditworthiness. Pricing for these bonds is expected to be finalized and announced later today.