The L'Oreal group was initially started in 1909 in a small family business, and initiated its IPO on October 8, 1963. Held by the Bettencourt family to the tune of 27.5% and 26.4% by Nestle, the group is now a component of the CAC 40. As a world leader in cosmetics, L'Oreal has a diversified portfolio of brands and is present on all distribution channels.
The group's offer is extremely wide, since all branches of the cosmetics industry are represented in its portfolio of products with high quality products through retail business products and dermato-cosmetic products. This allows the group to be present in both current products than on products with high development potential. The market for cosmetics has strong growth potential because of the permanent increase in the number of potential consumers, and it is also marked by increased competition.
As part of the analysis, this study will first present the sector and the business we've chosen. Then, it will outline the possible methods to evaluate a plan of Employee Stock Option under IFRS 2, and the choice of professionals in this evaluation. Finally, an analysis on the Employee Stock Option Group and assumptions enabling the evaluation of the plan and the methodology that will be followed.
Eugene Schueller, a French chemist in1907 developed a formula to dye hair and he sold the dye among hairdressers in Paris. In 1909 the creation of the "French Society of Harmless Hair Dyes ," was set up which would eventually became L'Oreal as it is known today. In the year 1912 the first export was made to Holland, Austria, Italy (a few years later, in addition to the United States, South America, the Far East and Russia). Today,L'Oreal is present in every country in the world.
L'Oreal gradually began to the address all ranges of cosmetics sector. Today, the group has world famous brands in various sectors.
The segments in which the group is present is as follows: color, makeup, skin care, perfumes, hair products and cosmetics .
Recently, Lindsay Owen-Jones, head of L'Oreal has set up a capital readjustment. The Bettencourt family (heir to Schueller) and Nestle, the two main shareholders of the group ended a thirty-year-old agreement, which expired in the spring, and thus have redefined their interests.
Now, the Bettencourt family who will have 27.5% control of the capital and 28.6% of the voting rights, while Nestle will own 26.4% also directly for 27.5% of the voting rights. Previously, the first held 51% and 49% of the second, Gesparal, the holding company which controlled 53.8% of the cosmetics group. Both had double voting rights amounting to 71.7%. They are now abandoned.
The company Eurostaf in charge of the sector has studied this segment and has estimated the market for 2005 to about 170 billion dollars in retail prices and expects its growth rate will be between 4% and 7% per year.
Individuals are more sensitive to their image and the gaze of others.The physical appearance plays a major role in social relations.
The products of skin care and fragrances meet this growing need of consumers to take care of their skin, to hide any flaws and to highlight the positive. Because of the physical specificity of certain populations, the cosmetics market is seen as broader and more segmented that can encompasses new potential customers.
Tags: L'Oreal group; employee stock option; evaluation of the plan
[...] We will assume that each year (from 6th) of the beneficiaries of this plan will exercise their right to buy, whatever the share price of L'Oreal, as they are leaving the group Hypothesis early exercise of options held, because the exercise price is less than in the underlying In this case some recipients do not want to wait and probably think that in future they will have no better hope of gain. To estimate the number of people involved in this case, we will rely on a table summarizing all stock option plans between 1995 and 2001. [...]
[...] Thus, if one considers a stock option plan for members of the staff of a company, stock options are subject to a long life, and they will be exercised during the period running from the date of vesting until the end of the life of the option, and are often exercised early. These factors should be considered when estimating the fair value of options at the grant date. For many companies, this might preclude the use of the Black-Scholes formula, which does not allow a possibility of exercise before the end of the life of the option, and therefore may not accurately reflect the effects of expected early exercise. [...]
[...] In December 2004, the turnover amounts to in consumer products, to for luxury goods for professional products and finally to active cosmetics. II / The core of the group L'Oreal L'Oréal develops, manufactures and sells cosmetics. Products manufactured by the group are of two types: - Cosmetic products include hair care, makeup, coloring, skin care and fragrances. The production of cosmetics represents of sales of the group. - Dermatological and pharmaceutical products. The production of these goods represents of the total turnover. [...]
[...] Individuals are more sensitive to their image and the gaze of others. The physical appearance plays a major role in social relations. The skin care and fragrance products meet this growing need of consumers to take care of their skin, and to hide their failure Because of the physical specificity of certain populations, the cosmetics market is seen as broader and more segmented, and encompasses new potential customers. Take care of the physical appearance and image, is a universal need. [...]
[...] The Formula It is used to calculate the theoretical value of an option from the five following data: : the current value of the underlying stock : the remaining time for the option before maturity : the exercise price set by the option : the risk-free interest rate : the volatility of stock price The theoretical price of an option to buy (call), which gives the right but not the obligation to purchase the asset with the value at the date is characterized by its repayment : The option prices are given by the expectation under risk neutral probability of the repayment updated or : Similarly, the theoretical price of an option to sell or reimbursement , is given by : With : the distribution function of the standard normal distribution is The use of this model is widespread in the financial markets, but it does not model reality. [...]
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