By sharing his views publicly with Nestle, Daniel Loeb is hoping to pressure the company into improving its performance in comparison with its peers.
As per a source familiar with the matter at hand, Daniel Loeb, an activist investor, is keeping up the pressure on Nestle to perform, by sharing his views with the company as part of a regular dialogue.
Last month, Nestle Europe’s most valued public company, unveiled its $21 billion (20 billion Swiss franc) share buyback plan which was coupled with another strategic plan to increase leverage and prioritize acquisitions in high-growth areas. Through the second plan, Nestle hopes to mitigate slowing demand for packaged food.
Loeb’s move comes just two days after he urged Nestle to improve returns its performance. Loeb’s Third Point fund has taken a $3.5 billion stake in the company making him Nestle’s eighth-largest shareholder.
Nestle however has not addressed his calls for exiting its $26 billion stake in L’Oreal or set a formal margin target of 18% to 20% by 2020.
Danone and Unilever have recently set their own respective 2020 margin targets of 20%.
Analysts expect Nestle new CEO, Mark Schneider to set, or at least imply, a long-term margin target, at its September 26 investor seminar.
“Third Point’s stake may add urgency to margin delivery and sharpens focus on the September investor days,” said analysts from Liberum.
Loeb’s strategic move on Nestle comes in the wake of Unilever fending off a surprise $143 billion takeover bid from Kraft Heinz.
Both events go to highlight the magnitude of the trouble rocking the packaged food sector. New generation of consumers are tending to prefer smaller brands leaving big ones high and dry.
Although Nestle has a cost-savings program, it however did not disclose how much of it will go towards raising its margins, which incidentally are at the low end of its peer group.
On the top of Third Point’s wish list for Nestle, is improved productivity, said a source who preferred the cover of anonymity.