Third Point for ‘bold action’ at Nestle

Nestle shares up 4% as investors hope US shareholder activist’s stake will accelerate change at group

Nestle is under pressure from US activist shareholder Third Point, which has taken a $3.5 billion (Dh12.85 billion) stake in the food maker and is pushing Europe’s largest company to improve margins, buy back shares and get rid of non-core businesses.

Nestle shares jumped as much as 4.8 per cent yesterday, touching a record high as investors hoped that Third Point’s stake, made public on Sunday night, will accelerate change at the group based on the shores of Lake Geneva which has a reputation for being slow-moving and insular.

The stake is the largest ever taken by the hedge fund, which is run by American investor Dan Loeb and has pressed for change at US internet firm Yahoo and Japan’s Sony Corp.

The global packaged goods industry is grappling with slowing emerging markets, pressure on prices and a consumer shift away from traditional brands towards healthier, fresher fare. Nestle has missed its long-term sales target for four successive years.

The company, which makes coffee, candy, pet food, bottled water and prepared meals, said it was committed to its strategy under new Chief Executive Mark Schneider. Before yesterday’s share jump, Nestle had a market value of $263 billion, making it the largest traded company in Europe.

Third Point disclosed the Nestle position, representing 1.3 per cent of the company, in a letter to its investors posted on its website. It argued the company should sell its 23 per cent stake in French cosmetics firm L’Oreal SA, a stake which was worth about $27 billion on Friday.

“We feel strongly that in order to succeed, Dr Schneider will need to articulate a decisive and bold action plan that addresses the staid culture and tendency towards incrementalism that has typified the company’s prior leadership and resulted in its long-term underperformance,” Third Point wrote in the letter.

The hedge fund said Nestle should set a formal profit margin target of 18 per cent to 20 per cent by 2020.