Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Loeb pressures Nestle for more sales, restructuring

Published 02/07/2018, 02:08
© Reuters. A Nestle logo is pictured on a coffee factory in Orbe
DJI
-
DOW
-
NESN
-
FMEG
-

By Svea Herbst-Bayliss

BOSTON (Reuters) - Billionaire investor Daniel Loeb on Sunday stepped up pressure on food group Nestle SA (S:NESN), in a letter that urged its board to be "sharper," "bolder" and "faster" in spinning off businesses and untangling its complex management structure.

"This is a call for urgency – rather than incrementalism," said Loeb's letter. It came with a 34-page presentation with recommendations and critiques. Third Point, the $18 billion hedge fund which has invested more than $3 billion in Nestle, also launched website http://www.nestlenow.com to push its case.

Loeb's letter, seen by Reuters, demanded that Nestle spin off more businesses that do not fit its strategy including ice cream, frozen foods, and confectionary; divide itself internally into three divisions - beverages, nutrition and grocery; and add an outsider to the board with expertise in the food and beverage business.

Each division should have its own CEO, regional structure and marketing heads, Loeb said. This would "simplify (Nestle's) overly complex organizational structure," the letter said.

Nestle had no immediate comment on the letter, which was first reported by the Financial Times.

Loeb's demands came roughly on the first anniversary of his investment in Nestle and at a time of significant merger activity in the food industry. For months, the activist investor who previously pushed for change at Yahoo and Dow Chemical (NYSE:DOW) as well as other companies watched and periodically made supportive public comments about Nestle's new chief executive officer, Mark Schneider.

But his letter made clear that Third Point is no longer willing to keep its critiques behind closed doors.

It criticized Nestle's slow sales growth, declining stock price and its failure to sell off more pieces that do not fit its "nutrition health and wellness" strategy.

The fund manager's biggest concern was corporate structure, with the board of directors in charge of strategic direction.

"Nestle’s insular, complacent, and bureaucratic organisation is overly complex, lethargic, and misses too many trends," Loeb said in the letter.

In early 2017, the Swiss company hired Schneider, a German, as its first non-Swiss CEO in nearly a century. He had won praise for overhauling Fresenius Medical Care (DE:FMEG).

But former CEO Paul Bulcke remained Nestle's board chair, which raised eyebrows among governance experts. Insiders say that after months at the helm, Schneider has yet to bring in a broad team of his own.

© Reuters. A Nestle logo is pictured on a coffee factory in Orbe

Industry experts say CEOs sometimes privately welcome public critiques from big shareholders, as effective cover to push through changes more aggressively. Loeb has only put together websites twice before - at Yahoo and Dow Chemical, but he has been vocal at plenty of companies and most recently pushed for United Technologies to break itself into three companies.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.