Economy

Nestle Targeted By Activist Third Point

Nestle Targeted By Activist Third Point”

Third Point, the hedge fund run by activist investor Dan Loeb, on June 25 disclosed an approximately $3.5 billion stake in Nestle and is urging the Swiss maker of Kit Kat bars and Poland Spring water to sell its 23 percent stake in cosmetics company L'Oreal and to borrow more money to buy back shares.

Third Point's stake was originally reported by Bloomberg.

In a letter to the investment group's shareholders, Third Point argued Nestle requires "a decisive and bold action plan" that addresses the "staid culture" and "tendency towards incrementalism" it says has marked strategy at the world's largest food maker. While the exact size of the stake couldn't be confirmed, Nestle would be a formidable target with a market value of about US$264 billion.

Nestle and Third Point were not immediately available for comment.

Mr Loeb is calling on Nestlé to sell its 23pc stake in French cosmetics company L'Oreal to increase its firepower for share buybacks and to ramp up its profitability targets to deliver 18pc to 20pc profit margins by 2020.

More news: Low-cost grocery chain Aldi plans more US stores

Chocolate makers especially are grappling with weak US consumption as Americans increasingly turn their backs on sugar. Recently, Nestle said it would look to sell its $900 million-a-year USA confectionery business.

Consumer companies have become popular targets for activist shareholders. So far, activist investors have predominantly targeted US companies, putting pressure on them to boost margins. In 2015, billionaire hedge fund manager Bill Ackman amassed a $5.6 billion stake in snack giant Mondelez International Inc. and called for management to improve the company's performance, leading to cost cuts. It also recommended it more than double its debt load, as well as sell the L'Oreal stake, in order to generate the capital to buy back stock. The hedge fund also said in April it had invested in UniCredit SpA, the second largest listed bank in Italy which has a significant presence in Germany and Austria, drawn by its low valuation and €13 billion rights issue in March.

Nestle stock has gained over 55% in the last five years. The firm has also focused much of its recent activism in Japan, where investments have included Seven & i Holdings Co. and Sony Corp.

"Nestle has arguably been lackadaisical and complacent and underperformed its potential", Bernstein analysts said. "This is already happening...and we expect that management will indicate it will likely to continue", he wrote in an investor note.



Like this

loading...
loading...

Latest


26 June 2017
Takata files for bankruptcy as air bag recalls bite
Honda Motor Co, Takata's biggest customer, said it had reached no final agreement with Takata on responsibilities for the recall. Key, a Chinese company with global operations, makes inflators, seat belts and crash sensors for the auto industry.

26 June 2017
Formula One Azerbaijani Grand Prix qualifying session 1
Max Verstappen retained the top spot in Friday evening's practice, despite crashing in the final minute of the session. Video from last year's race shows a seemingly endless stream of beauties walking along in their special uniforms.

26 June 2017
Paulinho unlikely to complete Barcelona move - Scolari
But talks have progressed nicely, and the player himself confirmed there's an offer on the table for him to join Los Blaugranas. Barcelona believe they can capture his signature at a lower price if the player puts pressure on his club to cash in.

26 June 2017
Spieth wins Travelers with 60-foot shot from bunker
But, after Spieth had dropped a shot on the 14th and Berger made a birdie on the 15th, the pair were tied. He still had a birdie putt left for a chance to continue Sunday's Travelers Championship.

26 June 2017
Horrific head-on Mississauga crash kills adult, two children
Winston Churchill Boulevard remained closed in all directions at the QEW overnight but all lanes have since reopened. Police are hopeful that other drivers in the area who witnessed the collision will contact police or CrimeStoppers.

26 June 2017
Lady Aurelia does it again with King's Stand win
Lady Aurelia is a very special filly", purred trainer Wesley A Ward, who was welcoming home his eighth Royal Ascot victor . This year women were permitted to wear jumpsuits for the first time, as long as they reached to the ankle.

26 June 2017
Jaguar XE, XF and F-Pace gain 296bhp 2.0-litre petrol engine
The introduction of the powerful new engine is the latest in a series of enhancements to the XE, XF and F-PACE. In the Jaguar XF business saloon the new engine delivers 0-100km/h in 5.6 seconds (0-60mph in 5.5 seconds).

26 June 2017
Boeing, Ruili Airlines Announce Commitment for 20 737 MAXs
But on Wednesday, China's Donghai Airlines said it would convert 10 current 737 Max orders to 737 Max 10 orders. Ryanair operates an all-Boeing fleet and took delivery of its 450th Boeing aircraft in March 2017.

26 June 2017
Brewers lose opener in Atlanta, 5-4
He held Eric Sogard, Thames, Travis Shaw and switch-hitter Nick Franklin to a combined 1 for 9 with two walks and four strikeouts. Bravos starter RA Dickey was at the top of his game with the lone run on five hits and a free pass through seven innings pitched.

26 June 2017
Trump reaffirms commitment to build Mexico Wall
He said that the solar panels would provide cheap energy and help to cover up the cost of the controversial wall, BBC reported . The tweet is apparently a reference to a report last month from the International Institute for Strategic Studies .