PARIS: Shares in L'Oreal surged by 4.6 percent on Friday on news that the group, the world's top cosmetics company, may be looking to buy back Swiss food giant Nestle's holding.
The stock surged to 128.05 euros in midday deals on the Paris stock exchange which showed an overall loss of 0.63 percent.
The rally also comes on the heels of L'Oreal's six-month earnings report which was released after the market closed on Thursday.
For the six months ending June 30, L'Oreal's said its net profit rose 5.2 percent to 1.7 billion euros ($2.25 billion), thanks largely to strong sales.
"The results are broadly in line with expectations, but the share should mainly react on the announcement of the group" regarding Nestle's stake in L'Oreal, Aurel BGC strategist Fabien Laurenceau said.
In an interview published in newspaper Les Echos on Friday, L'Oreal chief executive Jean-Paul Agon referred to market discussion about whether Auchan might consider buying Nestle's 29.3-percent stake in the group.
"We have the resources to allow us to consider all types of opportunities. For us, all options are on the table," he was quoted as saying.
This fuelled market speculation after Nestle's chairman Peter Brabeck had said on Thursday that the 10-year mutual right of first refusal for the holding would not be extended when it expires next year.
Later Friday however, Agon distanced himself from the article in Les Echos, telling a press conference "I didn't at all say to Echos that we were ready to, or desired to buy back their (Nestle's) holding in us".
"I just said that we as everyone knows have significant financial resources since we have a positive cash flow and 9.0 percent in Sanofi. Full stop." Les Echos said a potential transaction could be worth up to 22 billion euros.
In its results for the first half of the year, L'Oreal confirmed its target for 2013, saying it was "confident in the group's ability to once again outperform the market, and to achieve a further year of growth in sales, results and profitability".
The group recorded a "record" operating profit in the period of around 2.0 billion euros, amounting to 17.4 percent of sales.
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