Activist Hedge Fund Takes $3.5 Billion Stake in Nestlé
Third Point, the New York-based activist hedge fund, has purchased a 1.3% stake in Nestlé for SFr3.28 billion ($3.5 billion). Third Point is urging the world’s largest food group, which is now under new leadership following the accession of new chief executive Mark Schneider, to improve its margins, shed non-core businesses, including its 23% stake in French cosmetics firm L’Oreal, and to buy back shares.
According to Third Point, in order to succeed, Mark 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. The hedge fund advocates the establishment of a formal profit margin target of 18-20% by 2020 – against Nestlé’s current margin of about 15.3% – in order to help improve productivity.
To generate capital to buy back stock, Third Point has suggested that Nestlé should more than double its debt load and sell the L’Oreal stake valued at about $27 billion.
Third Point was founded in 1995 by Daniel S Loeb, who serves as chief executive officer and oversees all investment activity. The stake in Nestlé is the largest ever taken by Third Point.
