Shares in L’Oreal surged by 3.8 per cent today 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 surge to 127.00 euros in morning deals on the Paris stock exchange which showed an overall loss of 0.32 per cent.

The rally also comes on the heels of L’Oreal’s six-month earnings report which was released after the market closed yesterday.

For the six months ending June 30, L’Oreal’s said its net profit rose 5.2 per cent to € 1.7 billion ($ 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 today, L’Oreal chief executive Jean-Paul Agon said the company may consider buying Nestle’s 29.3 per cent 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 yesterday that the 10-year mutual right of first refusal for the holding would not be extended when it expires next year.

According to Les Echos, the value of such a stake transaction would be up to 22 million 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, amounting to 17.4 per cent of sales.

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