Billionaire activist investor Daniel Loeb's Third Point LLC hedge fund has taken its largest ever bet on a public company, accumulating a $3.5 billion stake in Nestlé SA and piling pressure on the world's largest packaged foods company to find ways to accelerate growth.
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The stake amounts to about 1.25% of Nestlé's shares.
"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," the fund said in a statement.
Third Point said Nestlé has fallen behind over the past decade, and that while peers have adapted to changes in how people shop and more competition from small, local brands, "Nestlé has remained stuck in its old ways."
Third Point is known for agitating for change at public companies. Mr. Loeb played a big role in shaking up internet-technology company Yahoo Inc. as an activist shareholder and board member some years ago. He is also known for fiery-worded letters to executives and proxy fights at companies like Sotheby's.
Nestlé in February said it was dropping a long-running sales-growth target after missing that goal for the fourth-straight year. The company's new chief executive officer, Mark Schneider, a health-care veteran, recently said Nestlé would look to sell its U.S. confectionery business. Nestlé has also faced calls to consider selling its frozen-food operations, another business that has struggled as consumers look to fresh options.
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Third Point said Nestlé's per-share earnings have stood still for five years, translating to slowing dividend growth.
"Without addressing the company's stalled earnings, further dividend increases will be unsustainable at historical rates," said the firm. "While Nestlé has stood still, its peers have pursued productivity increases aggressively and made other changes in order to deliver earnings growth and create shareholder value in a slower sales growth world."
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(END) Dow Jones Newswires
June 25, 2017 18:34 ET (22:34 GMT)