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U.S. activist puts pressure on Nestle

Nestle is under pressure from U.S. activist shareholder Third Point, which has taken a $3.5 billion share in the food maker and is pushing Europe's largest company to improve profit, buy back shares and get rid of not profile businesses.

27.Jun.17 12:00 AM
By Daria Zaytseva


U.S. activist puts pressure on Nestle
On Monday, Nestle shares jumped as much as 4.8 percent, touching a record high as investors hoped that Third Point's share, made public on Sunday night, will accelerate change at the group which has a reputation for being slow-moving and insular.

This package of shares is the largest ever taken by a hedge fund that manages American investor Dan Loeb. Before Monday'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 percent of the company, in a letter to its investors posted on its website. It argued that the company should sell its 23 percent share in French cosmetics firm L'Oreal SA, which was worth about $27 billion on Friday. L'Oreal shares rose 3.8 percent on Monday.

The hedge fund said that Nestle should set the official profit rate from 18 percent to 20 percent by 2020, to help increase productivity. Nestle's current margin is about 15.3 percent, whereas Unilever's is 16.4 percent and it set a target to reach 20 percent by 2020.

Third Point also recommended Nestle more than double its debt load, and sell the L'Oreal share, in order to generate the capital to buy back stock. Vontobel analyst Jean-Philippe Bertschy said that suggestions echoed proposals made by other shareholders for years. 

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