Cosmetics giant L’Oréal SA is selling a €3 billion ($3.1 billion) stake in Sanofi back to the French drugmaker, cashing in part of its holding after Sanofi’s shares outperformed the market over the past year.

L’Oréal is selling 29.6 million shares at €101.50 each, the companies said in statements Monday. After the sale, L’Oréal will own 7.2 percent of Sanofi’s share capital, down from about 9.4 percent, and 13.1 percent of its voting rights.

The price is a 2.8 percent discount to where Sanofi shares closed Friday. Shares of Sanofi fell as much as 0.63 percent in Paris to €103.74. L’Oréal fell as much as 2.62 percent amid worries about potential US tariffs.

The sale of the Sanofi shares will “optimise” L’Oréal’s balance sheet following recent acquisitions and further diversify its financing sources, the maker of shampoo and cosmetics brands like Garnier and Lancome said. L’Oréal has been acquisitive in recent years, notably buying soap maker Aesop in a transaction worth $2.6 billion in 2023.

The repurchase is part of Sanofi’s share-buyback programme announced last week, the drugmaker said.

Sanofi shares in Paris have gained almost 20 percent over the past year while shares in the beauty group have fallen by around the same amount amid a demand downturn in China. L’Oréal will report full year earnings on Thursday.

L’Oréal has had a stake in Sanofi since it sold a company in 1999 to the drugmaker, and was paid in shares. The company collected €1.27 billion in dividends from Sanofi between 2021 and 2023.

Investors have closely watched the possibility of L’Oréal selling shares in Sanofi to help fund its expansion.

They have similarly kept an eye on Nestle SA’s plans for its shareholding in L’Oréal. About three years ago, Nestle reduced its stake in the cosmetics company controlled by the billionaire Bettencourt Meyers family to about 20 percent. The family controls L’Oréal via its 35 percent stake, which gives it a fortune estimated at about $78 billion by the Bloomberg Billionaires Index.

By Phil Serafino and Angelina Rascouet

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