Nestle, L’Oreal shares up after move by hedge fund

NESTLE and L’Oreal shares rose yesterday after US hedge fund Third Point bought a 1% stake in the Swiss food giant and immediately urged it to sell its large holding in L’Oreal.

Third Point has a reputation for aggressively pushing for change at target firms, including Sony and Yahoo!, and in a letter to investors on Sunday, Third Point founder Dan Loeb announced the fund had acquired 1% in Nestle, worth $3.5-billion (R45-billion).

The fund says Nestle, which makes Nescafe coffee and Perrier water, has probably the best portfolio of brands in the sector, but has not kept up with changing consumer tastes and buying habits.

Shares in Nestle were up 4.14% at $85.50 (R1 098) in Zurich at 11.38am while in Paris L’Oreal was up 3.83% at ß195.30 (R2 813).

Third Point, which has had talks with Nestle management, called on the group to increase its margins to 18-20% by 2020 and build up funds to buy back stock.

It also said Nestle should sell the rest of its stake in L’Oreal, judging this the right moment to monetise the holding, worth some $25-billion (R321-billion).

L’Oreal declined to comment on the matter when contacted.