Nestlé Fails to Satisfy Third Point -- WSJ
January 23 2018 - 3:02AM
Dow Jones News
By David Benoit and Saabira Chaudhuri
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 23, 2018).
Daniel Loeb's Third Point LLC ratcheted up the pressure on
Nestlé SA, saying its business 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 stake in the
consumer-goods company last year. But Mr. Loeb, in a letter to
Third Point investors on Monday, said Nestlé could make more
changes, including selling its skin-health business. He also
repeated a call for Nestlé to sell its large stake in cosmetics
giant L'Oréal SA.
Mr. Loeb prodded new Chief Executive Mark Schneider to clarify
Nestlé's focus, saying shareholders were confused by recent
acquisitions.
The letter follows several months during 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 a clear sign that Mr. Loeb isn't completely
satisfied, raising the possibility of a more public
confrontation.
"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."
Nestlé, whose businesses range 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.
"We keep an open dialogue with all of our shareholders and we
remain committed to executing our accelerated value creation
strategy," said a spokesman for the Swiss company. "Nestlé's board
and management welcome the continued input of all
shareholders."
Mr. Loeb wants Nestlé to increase capital return to investors by
accelerating or increasing the share buybacks it 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 acquired 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
including a recent deal to buy a Canadian vitamin maker, saying the
Vevey-based company should better explain the business
rationale.
Write to David Benoit at david.benoit@wsj.com and Saabira
Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
January 23, 2018 02:47 ET (07:47 GMT)
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