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Activist Investor Dan Loeb takes Stake in Nestle

Activist Investor Dan Loeb takes Stake in Nestle”

Nestle SA is being targeted by activist investor Dan Loeb's hedge fund Third Point, which has built a stake of more than $3.5 billion in the world's biggest food company.

Mark Schneider, the company's new chief executive, has been trying to reignite growth since joining Nestle in January from German healthcare group Fresenius FREG.DE .

"Nestle has fallen behind over the past decade in an environment where growth has slowed due to changes in consumer tastes and shopping habits, as well as an influx of new competition from smaller, local brands", Loeb wrote in the letter. Food companies are under pressure to reduce costs, after Kraft Heinz Co.'s unsuccessful bid for Unilever earlier this year showed that even the largest players could become targets.

In February, Schneider scrapped Nestle's long-standing sales target, which it had missed for four straight years.

Nestle took a first step towards appeasing investors in 2014, when it sold 48.5 million L'Oreal shares back to the company. "Beyond that, we have no specific comment."One top-40 investor said Nestle has done a good job adapting over the years to a changing industry, selling its stake in eyecare company Alcon and buying pet food business Ralston Purina and Wyeth Nutrition."The new CEO has been brought in with a mandate for change", the investor said, pointing out that Schneider is Nestle's first external CEO hire in almost a century". The pharmaceutical company's stock has returned 13 percent a year over the past five years, including dividends, though the shares are down about 12 percent from a record of 100.65 euros set in 2015.

Third Point's stake was originally reported by Bloomberg. The company should adopt a formal target of boosting its operating profit-margin to as much as 20 percent by 2020, from about 15 percent in 2016, and double its leverage ratio to free up more cash for stock buybacks, the hedge fund said. "I think he's listening carefully to what investors are saying".

Loeb said Nestle has unrealized potential because it is "rare to find a business of Nestle's quality with so many avenues for improvement".

Bennink ran baby food maker Royal Numico when Danone (DANO.PA) bought it for $16.8 billion in 2007, oversaw the break-up of Sara Lee and ran its coffee business, which is now owned by JAB Holding.

Nestle said this month it might sell its $900-million-a-year US confectionery business in its latest effort to improve the health profile of its sprawling portfolio. The Anglo-Dutch company, while contrasting its long-term approach with what it described as a push for short-term profits by the US company, responded by promising to boost shareholder returns and put its slow-moving spreads business up for sale.



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