Carleton English
June 25, 2017
New York Post
Dan Loeb just placed his biggest bet ever on a chocolate company.
The activist investor’s hedge fund Third Point LLC amassed a $3.5 billion stake in Nestle, the world’s largest packaged foods company, representing roughly 1.25 percent of the Swiss-based company’s shares. Loeb is hoping to reinvigorate the brand amid changing food tastes as well as what he says is the company’s underperforming stock.
“Despite having arguably the best positioned portfolio in the consumer packaged goods industry, Nestlé shares have significantly underperformed most of their U.S. and European consumer staples peers on a three year, five year, and ten year total shareholder return basis,” Third Point said in a letter to investors Sunday.
“Nestlé has remained stuck in its old ways,” the hedgie said, while acknowledging that shoppers are increasingly purchasing smaller, local brands.
Earlier this month, Nestle said it was considering a sale of its US confectionery business, which houses candy brands such as Butterfinger, BabyRuth, and LaffyTaffy — a move Loeb wrote the hedge fund was “encouraged” to see.
Loeb, blasting Nestle’s “staid” corporate culture for being prone to “incrementalism” rather than the quick, dramatic changes the company needs, wrote that Nestle could benefit from share repurchases, re-evaluate its portfolio of brands and sell its 29 percent stake in L’Oreal.
Loeb’s hedge fund, whose previous targets have included Yahoo and Sony, said two months ago in a quarterly letter to investors that it still sees growth opportunities in the US under President Trump. It also hinted that it would be making investments in Europe.
“We are seeing more opportunities in Europe because of strong and improving economic data, a trend that will likely continue now that the French elections have passed without incident,” Loeb wrote in April.
Shares of Nestle, which trade in the US on over-the-counter markets are up nearly 22 percent this year. Loeb wrote that much of the recent upside is due to “the market’s anticipation that with a newly appointed CEO, Nestlé will improve.”
Dr. Ulf Mark Schneider was appointed CEO of Nestle last June.
Representatives from Nestle did not immediately respond to requests to comment
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