Nestle-L'Oreal relationship

RNS Number:9851U
Nestle SA
03 February 2004


                                 Press  Release

                 Nestle-L'Oreal Relationship Put on a New Basis


Vevey, February 3, 2004  -  Gesparal, the majority shareholder in L'Oreal,
announced today that its two shareholders, Nestle S.A. and the Bettencourt
family, have reached agreement on proposing a merger between L'Oreal and
Gesparal.

The following elements of the agreement merit to be highlighted:

*   Absorbing Gesparal will not influence L'Oreal's financial structure or
    its results.

*   Nestle's 49 percent stake in Gesparal becomes a 26.4 percent direct
    holding in L'Oreal as a result of the merger between Gesparal and L'Oreal.

*   Abolition of double voting rights to be proposed to the L'Oreal general
    meeting.

*   The Bettencourt family and Nestle are contractually committed not to
    modify their respective stakes for an agreed period.

*   The Bettencourt family and Nestle have agreed on a mutual right of
    first refusal for their L'Oreal shares for a period of 10 years.


Mr. Rainer E. Gut, Chairman of Nestle S.A., said: "I am very pleased that we
found an agreement that safeguards the interests of all parties concerned.
Nestle shareholders will benefit from a more transparent valuation of the
L'Oreal stake which remains an important strategic investment for Nestle."

The new agreement announced today cancels and replaces the contracts signed
earlier between the Bettencourt family and Nestle, including Nestle's obligation
to purchase all or part of the family's Gesparal shares at its request.

The companies held jointly by Nestle and L'Oreal, i.e. Galderma and Inneov, are
not concerned in any way by this new agreement and will continue operating as
before.

Mr. Peter Brabeck-Letmathe, Vice-Chairman of the Board and CEO of Nestle,
stated: "I believe that the newly signed agreement constitutes a very solid
basis on which we can even reinforce the excellent relationship developed
between Nestle and L'Oreal over the past 30 years. This agreement both ensures
continuity in our operational work in our joint ventures and gives Nestle more
flexibility with regard to its strategic investment in the world's leading
cosmetics group."


Contacts:       Media:      Francois-Xavier Perroud      Tel.:  [phone]
                Investors:  Roddy Child-Villiers         Tel.:  [phone]


For additional details, please find below the press release issued by Gesparal:



                          GESPARAL  Press Release


                  Proposed Merger between Gesparal and L'Oreal

Paris, February 3, 2004. The two shareholders of Gesparal, Mrs. Liliane
Bettencourt and her family, and Nestle, have agreed to propose the absorption of
Gesparal by L'Oreal. The Gesparal Holding Company owns 53.8% of the Capital and
71.7% of voting rights of L'Oreal. The Bettencourt family and Nestle own
respectively, 51% and 49% of Gesparal.

The extraordinary development of L'Oreal over the last 30 years during which
Gesparal was its majority shareholder enabled it to become the world leader in
its field. Today, it is possible and desirable to simplify the capital
structure. In addition, the greater transparency and the further development of
corporate governance, both of which are provided for in this agreement, will
encourage the continuing development of L'Oreal.

The main points of the agreement are the following:


  * The absorption of Gesparal by L'Oreal will be proposed at the next Annual
    Shareholders Meeting, planned for April 29, 2004. After completion, the
    Bettencourt family will hold 27.5% of L'Oreal's capital, and Nestle 26.4%.
    The merger will have no effect, nor on its financial structure or on its
    results, as Gesparal's investment portfolio is composed exclusively of
    L'Oreal's shares and it  has no debt.

  * At the same annual shareholders meeting of L'Oreal, it will also be
    proposed to eliminate double voting rights.

  * The Bettencourt family and Nestle have agreed to keep all of their L'Oreal
    shares for a period of 5 years, beginning with the date of this shareholders
    meeting. However, should there be a public tender offer for L'Oreal shares
    by a third party, the Bettencourt family and Nestle would have the right to
    tender their shares or to make a counter-offer.

  * The Bettencourt family and Nestle have agreed not to increase, either
    directly or indirectly, their respective shareholdings in L'Oreal, during
    the lifetime of Mrs. Bettencourt, and in any case during a period of at
    least 3 years, starting from the date of this shareholders meeting.

  * The Bettencourt family and Nestle have mutually agreed to mutual rights of
    pre-emption on their respective shareholdings in L'Oreal for a period of 10
    years. The Bettencourt family has the option of substituting a third party,
    notably L'Oreal.

  * A shareholders meeting will be asked to approve the nomination of three
    board members designated by the Bettencourt family and three board members
    designated by Nestle, as it is currently the case. At the board of directors
    of L'Oreal, the election of 2 Vice Chairmen, one nominated by the
    Bettencourt family and one nominated by Nestle will also be proposed.

  * The Board of Directors of L'Oreal will also be asked to create a Committee
    for Strategy and Implementation, made up of 6 members, including the CEO of
    L'Oreal who will be Chairman. 2 members of this committee will be proposed
    by the Bettencourt family, 2 by Nestle and 1 independent board member will
    also be included. It will meet 6 times a year. As in the case of the other
    Board committees, it will have a role of advice and recommendation, with the
    Board retaining all of its responsibilities.

  * This agreement is effective upon signature. It takes the place of any
    other agreement between the Bettencourt family and Nestle.


The agreement will be submitted to the "Autorite des Marches Financiers" (AMF),
the French financial market regulatory authority. The merger provided for in the
agreement is conditional upon the finding by the market authorities that there
is no requirement for a public offer for L'Oreal shares in light of the planned
merger.

This agreement will be published in its entirety following the decision of the
AMF.

Mrs. Liliane Bettencourt and Mr. Rainer E. Gut, Chairman of the Board of
Directors of Nestle, stated: "Our objective is to continue with our excellent
and mutual understanding and our balanced relationship, which, along with the
quality and the extraordinary commitment of L'Oreal management and its
employees, has contributed for so many years to making the company one of the
best in the world."

Mr. Rainer E. Gut said: "We are convinced that the agreement represents a very
solid base for continuing the impressive and very profitable growth of L'Oreal,
to which the Bettencourt family and Nestle have contributed since 1974, by the
support through Gesparal."

Mrs. Liliane Bettencourt and her daughter Mrs. Francoise Bettencourt Meyers
stated: "Through this new agreement, we are expressing our loyalty and
attachment to the L'Oreal Company, and the confidence that, both of us have in
L'Oreal, in its CEO Lindsay Owen-Jones and in all of its employees who are
responsible for its long term success."

                      This information is provided by RNS
            The company news service from the London Stock Exchange
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