Daniel Loeb's Third Point Calls for More Change at Nestlé -- Update
22 Gennaio 2018 - 5:10PM
Dow Jones News
By David Benoit
Daniel Loeb's Third Point LLC ratcheted up the pressure on
Nestlé SA, saying the company's portfolio needs to be further
simplified.
Nestlé has already taken a number of steps recommended by Mr.
Loeb, an activist investor who built up a large stake in the
company last year. But Mr. Loeb, writing to Third Point investors
in a letter Monday, said Nestlé could make more changes, including
selling its skin-health business. He repeated a call for Nestlé to
sell its large stake in cosmetics giant L'Oréal SA.
Mr. Loeb also called on new Chief Executive Mark Schneider to
clarify Nestlé's focus, saying shareholders were confused by recent
acquisitions.
The letter follows several months in which the two sides
appeared to agree on some of the big strategic shifts needed.
Indeed, Mr. Loeb acknowledged Monday that Nestlé has taken some
important steps recently, pointing to new board members the company
announced last week and its plans to increase margins and stock
buybacks.
But the letter is the clearest sign yet that Mr. Loeb isn't
completely satisfied, raising the possibility of a more public
confrontation on next steps.
"These actions are important steps in the right direction that
make it clear that Nestlé is responding to calls for action," Mr.
Loeb wrote. "We hope now that Dr. Schneider has completed his first
year and there is new blood on the Board, the company is able to
move with greater alacrity."
Representatives for Nestlé didn't immediately respond to
requests for comment.
Nestlé, which owns a medley of businesses, from frozen pizza and
ice cream to skin creams and bottled water, has attracted criticism
from other investors for being spread too thin at a time of rapidly
changing consumer tastes and heightened competition. The company in
recent years has tried to reformulate some of its most popular
offerings to make them healthier. It has also looked for
acquisitions more recently to help it shift focus to higher-growth
food, drink and health sciences offerings, such as coffee,
meat-free frozen meals and vitamins.
Mr. Loeb said Monday he wants Nestlé to increase capital return
to investors, calling for the company to accelerate or increase the
share buyback the company has already announced, the letter said.
Third Point owns about a 1.25% stake in Nestlé.
Following Mr. Loeb's previous demands, Nestlé has set a formal
profit margin target, announced a $20.8 billion share buyback
program and said it would use acquisitions and divestitures to
drive growth. Nestlé agreed earlier this month to sell its U.S.
confectionery arm.
In September, the company said it was accelerating the buyback
program it originally announced in June, buying shares evenly in
each of the three years to 2020, rather than backloading them in
2019 and 2020. Last week, the company said it would add to its
board the chief executives of Zara owner Inditex SA and Adidas AG,
as well as the former financial head of Baker Hughes, an oil-field
services company owned by General Electric Co.
Mr. Loeb on Monday criticized all those moves as not being
far-reaching enough, noting that the U.S. confectionery business is
just 1% of Nestlé's sales, and the acquisitions have so far "been
limited to a few small deals."
He also questioned Nestlé's expansion into consumer health care,
saying the Vevey-based company should better explain its rationale
for this.
Write to David Benoit at david.benoit@wsj.com
(END) Dow Jones Newswires
January 22, 2018 10:55 ET (15:55 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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