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Third Point Takes $3.5 Billion Stake in Nestlé Third Point Takes $3.5 Billion Stake in Nestlé
(35 minutes later)
LONDON — Over the past two decades, the hedge fund mogul Daniel S. Loeb established himself as one of the biggest activist investors around. Now, he has set his sights on one of Europe’s largest corporate citizens: Nestlé, the global food giant.LONDON — Over the past two decades, the hedge fund mogul Daniel S. Loeb established himself as one of the biggest activist investors around. Now, he has set his sights on one of Europe’s largest corporate citizens: Nestlé, the global food giant.
In a letter to investors sent on Sunday, his Third Point hedge fund argued that the Swiss conglomerate — whose wares range from candy to baby food to pet food — should sell its stake in L’Oréal and sell off nonessential operations as part of a broad shake-up of the company.In a letter to investors sent on Sunday, his Third Point hedge fund argued that the Swiss conglomerate — whose wares range from candy to baby food to pet food — should sell its stake in L’Oréal and sell off nonessential operations as part of a broad shake-up of the company.
It is the latest ambitious move by activist investors to shake up the giants of the corporate world. Flush with cash from investors, these funds have taken stakes in ever-bigger companies, hoping to goad them into selling themselves or breaking themselves up to improve their stock prices. It is the latest ambitious move by activist investors to rattle the leaders of the corporate world. Flush with cash from investors, these funds have taken stakes in ever-bigger companies, hoping to goad them into selling themselves or breaking themselves up to improve their stock prices.
Jana Partners, for instance, prodded change at Whole Foods Market. Earlier this month, the grocery store chain announced that it was selling itself to Amazon for $13.4 billion. And Trian Fund Management took a $3.5 billion stake in Procter & Gamble, as the consumer products behemoth has sought a way to improve stagnant sales.Jana Partners, for instance, prodded change at Whole Foods Market. Earlier this month, the grocery store chain announced that it was selling itself to Amazon for $13.4 billion. And Trian Fund Management took a $3.5 billion stake in Procter & Gamble, as the consumer products behemoth has sought a way to improve stagnant sales.
Third Point disclosed that it owns about 40 million shares in Nestlé, a stake that amounts to about $3.5 billion in stock. That would make the hedge fund the Swiss company’s sixth-largest shareholder, according to Standard & Poor’s Global market Intelligence. Third Point disclosed that it owns about 40 million shares in Nestlé, a stake that amounts to about $3.5 billion in stock. That would make the hedge fund the Swiss company’s sixth-largest shareholder, according to Standard & Poor’s Global Market Intelligence.
Behind Third Point’s investment in Nestlé is a conviction that the Swiss conglomerate must do more to reshape its product portfolio and adapt to changing consumer tastes and competition from smaller and more local brands. The hedge fund argued that the company’s earnings per share have not meaningfully improved over the last five years. Behind Third Point’s investment in Nestlé is a conviction that the company must do more to reshape its product portfolio and adapt to changing consumer tastes and competition from smaller, local brands. The hedge fund argued that the company’s earnings per share have not meaningfully improved over the last five years.
Shares in Nestlé have risen nearly 15 percent over the last 12 months, trailing fellow consumer conglomerate Unilever but outpacing other food companies like Mondelez and Kraft Heinz.Shares in Nestlé have risen nearly 15 percent over the last 12 months, trailing fellow consumer conglomerate Unilever but outpacing other food companies like Mondelez and Kraft Heinz.
“Third Point invested in Nestlé because we recognized a familiar set of conditions that make it ripe for improvement and change,” the hedge fund wrote in its investor letter. “It is rare to find a business of Nestlé’s quality with so many avenues for improvement.”“Third Point invested in Nestlé because we recognized a familiar set of conditions that make it ripe for improvement and change,” the hedge fund wrote in its investor letter. “It is rare to find a business of Nestlé’s quality with so many avenues for improvement.”
A representative for Nestlé was not immediately available for comment as of Sunday afternoon. A representative for Nestlé was not available for comment.
Third Point said that it was encouraged by Nestlé’s announcement earlier this month week that it was weighing the sale of its American candy business, which produces stalwart sweets like Butterfingers and Gobstoppers. Third Point said that it was encouraged by Nestlé’s announcement earlier this month that it was weighing the sale of its American candy business, which produces stalwart sweets like Butterfingers and Gobstoppers.
But the hedge fund argued that Nestlé should also sell its 23 percent stake in L’Oréal, he big cosmetics maker whose products range from its namesake beauty brand to luxury products like Kiehl’s. The fund argued that the holding is nonstrategic and could be sold off without incurring huge taxes.But the hedge fund argued that Nestlé should also sell its 23 percent stake in L’Oréal, he big cosmetics maker whose products range from its namesake beauty brand to luxury products like Kiehl’s. The fund argued that the holding is nonstrategic and could be sold off without incurring huge taxes.
Unlike in previous investments, where Mr. Loeb was known for his venomous attacks on the chief executives of the targeted company, Third Point praised Nestlé’s chief executive since January, Ulf Mark Schneider. The hedge fund pointed to his previous tenure at the German medical supply company Fresenius. But to succeed at Nestlé, the hedge fund argued, he needs to present a bold strategy that would overhaul the food giant’s performance. Unlike in previous investments, where Mr. Loeb was known for his venomous attacks on the chief executives of the targeted companies, Third Point has praised Nestlé’s leader, Ulf Mark Schneider. The hedge fund pointed positively to his previous tenure at the German medical supply company Fresenius. But to succeed at Nestlé, the hedge fund argued, he needs to present a bold strategy that would overhaul the food giant’s performance.
Mr. Loeb may not have read Nestle’s news releases over the last few weeks. In May, the company announced that it had teamed up with Amazon to offer a cooking companion that offers step-by-step recipe instructions, visual aids, skill demos and other content to help consumers prepare meals.Mr. Loeb may not have read Nestle’s news releases over the last few weeks. In May, the company announced that it had teamed up with Amazon to offer a cooking companion that offers step-by-step recipe instructions, visual aids, skill demos and other content to help consumers prepare meals.
The same month, it also announced it was retooling its Maggi line to eliminate ingredients consumers don’t like and add vegetables, grains and other more nutritional items.The same month, it also announced it was retooling its Maggi line to eliminate ingredients consumers don’t like and add vegetables, grains and other more nutritional items.
And this month, the company announced that it was the lead investor in a $77 million investment in Freshly, a subscription meal service. The company also announced this month that it was the lead investor in a $77 million investment in Freshly, a subscription meal service.
In addition, the company has worked over the last several years,to strip preservatives and other ingredients from its ice creams and dramatically improve its vast frozen foods portfolio. In addition, the company has worked over the last several years to strip preservatives and other ingredients from its ice creams and dramatically improve its vast frozen foods portfolio.
To advise Third Point on its investment, the hedge fund said that it had hired Jan Brennik, the former executive chairman of Sara Lee, as an adviser. To advise Third Point on its investment, the hedge fund said that it had hired Jan Bennink, the former executive chairman of Sara Lee.