STOCKS NEWS EUROPE-L'Oreal sags as stake buyback impact disappoints

Shares in L'Oreal reverse early gains and fall 2.8 percent in massive volumes, featuring among the top losers on the STOXX Europe 600 index , over disappointment about the level of earnings boost from the group's plan to buy back 8 percent of its own shares from Nestle (VTX: NESN.VX - news) .

L'Oreal says it will pay 6.5 billion euros ($9 billion) to buy the stake, which will be partially funded through the sale by L'Oreal to Nestle of its 50 percent stake in Swiss dermatology pharmaceuticals company Galderma. L'Oreal also says that it will not sell its stake in Sanofi (NasdaqGM: GCVRZ - news) to finance the deal.

"Earnings accretion is closer to 3 percent not 5 percent, and it seems like the street is viewing it as dead money now," a London-based trader says.

"Management ... confirmed no selling of Sanofi and said the accretion is 5 percent annualised, closer to 3 percent actual, slightly less than what market was thinking," another London-based trader says.

After two hours of trading, the volume on the shares represents more than twice the stock's daily average volume of the past three months, while the drop from the opening price of 134.70 euros a share represents a wipeout in market capitalisation of 5.23 billion euros, about 80 percent of the price L'Oreal will pay for Nestle's stake.

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