Cosmetics giant L’Oreal 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’Oreal 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% of Sanofi’s share capital, down from about 9.4%, and 13.1% of its voting rights.

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

The sale of the Sanofi shares will “optimize” L’Oreal’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’Oreal 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 program announced last week, the drugmaker said.

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

L’Oreal 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’Oreal 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’Oreal. About three years ago, Nestle reduced its stake in the cosmetics company controlled by the billionaire Bettencourt Meyers family to about 20%. The family controls L’Oreal via its 35% stake, which gives it a fortune estimated at about $78 billion .