Daniel Loeb's Third Point Calls for More Change at Nestlé -- 2nd Update

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Daniel Loeb's Third Point LLC ratcheted up the pressure on Nestlé SA, saying the company's portfolio needs to be further simplified.

Nestlé has already taken a number of steps recommended by Mr. Loeb, an activist investor who built up a large stake in the company last year. But Mr. Loeb, writing to Third Point investors in a letter Monday, said Nestlé could make more changes, including selling its skin-health business. He repeated a call for Nestlé to sell its large stake in cosmetics giant L'Oréal SA.

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Mr. Loeb also called on new Chief Executive Mark Schneider to clarify Nestlé's focus, saying shareholders were confused by recent acquisitions.

The letter follows several months in which the two sides appeared to agree on some of the big strategic shifts needed. Indeed, Mr. Loeb acknowledged Monday that Nestlé has taken some important steps recently, pointing to new board members the company announced last week and its plans to increase margins and stock buybacks.

But the letter is the clearest sign yet that Mr. Loeb isn't completely satisfied, raising the possibility of a more public confrontation on next steps.

"These actions are important steps in the right direction that make it clear that Nestlé is responding to calls for action," Mr. Loeb wrote. "We hope now that Dr. Schneider has completed his first year and there is new blood on the Board, the company is able to move with greater alacrity."

Representatives for Nestlé didn't immediately respond to requests for comment.

Nestlé, which owns a medley of businesses, from frozen pizza and ice cream to skin creams and bottled water, has attracted criticism from other investors for being spread too thin at a time of rapidly changing consumer tastes and heightened competition. The company in recent years has tried to reformulate some of its most popular offerings to make them healthier. It has also looked for acquisitions more recently to help it shift focus to higher-growth food, drink and health sciences offerings, such as coffee, meat-free frozen meals and vitamins.

Mr. Loeb said Monday he wants Nestlé to increase capital return to investors, calling for the company to accelerate or increase the share buyback the company has already announced, the letter said. Third Point owns about a 1.25% stake in Nestlé.

Following Mr. Loeb's previous demands, Nestlé has set a formal profit margin target, announced a $20.8 billion share buyback program and said it would use acquisitions and divestitures to drive growth. Nestlé agreed earlier this month to sell its U.S. confectionery arm.

In September, the company said it was accelerating the buyback program it originally announced in June, buying shares evenly in each of the three years to 2020, rather than backloading them in 2019 and 2020. Last week, the company said it would add to its board the chief executives of Zara owner Inditex SA and Adidas AG, as well as the former financial head of Baker Hughes, an oil-field services company owned by General Electric Co.

Mr. Loeb on Monday criticized all those moves as not being far-reaching enough, noting that the U.S. confectionery business is just 1% of Nestlé's sales, and the acquisitions have so far "been limited to a few small deals."

He also questioned Nestlé's expansion into consumer health care, saying the Vevey-based company should better explain its rationale for this.

Write to David Benoit at david.benoit@wsj.com

Daniel Loeb's Third Point LLC ratcheted up the pressure on Nestlé SA, saying the company's portfolio needs to be further simplified.

Nestlé has already taken a number of steps recommended by Mr. Loeb, an activist investor who built up a large stake in the company last year. But Mr. Loeb, writing to Third Point investors in a letter Monday, said Nestlé could make more changes, including selling its skin-health business. He repeated a call for Nestlé to sell its large stake in cosmetics giant L'Oréal SA.

Mr. Loeb also called on new Chief Executive Mark Schneider to clarify Nestlé's focus, saying shareholders were confused by recent acquisitions.

The letter follows several months in which the two sides appeared to agree on some of the big strategic shifts needed. Indeed, Mr. Loeb acknowledged Monday that Nestlé has taken some important steps recently, pointing to new board members the company announced last week and its plans to increase margins and stock buybacks.

But the letter is the clearest sign yet that Mr. Loeb isn't completely satisfied, raising the possibility of a more public confrontation on next steps.

"These actions are important steps in the right direction that make it clear that Nestlé is responding to calls for action," Mr. Loeb wrote. "We hope now that Dr. Schneider has completed his first year and there is new blood on the Board, the company is able to move with greater alacrity."

Nestlé, which owns a medley of businesses, from frozen pizza and ice cream to skin creams and bottled water, has attracted criticism from other investors for being spread too thin at a time of rapidly changing consumer tastes and heightened competition. The company in recent years has tried to reformulate some of its most popular offerings to make them healthier. It has also looked for acquisitions more recently to help it shift focus to higher-growth food, drink and health sciences offerings, such as coffee, meat-free frozen meals and vitamins.

"We keep an open dialogue with all of our shareholders and we remain committed to executing our accelerated value creation strategy," said a Nestle spokesman. "Nestlé's board and management welcome the continued input of all shareholders."

Mr. Loeb said Monday he wants Nestlé to increase capital return to investors, calling for the company to accelerate or increase the share buyback the company has already announced, the letter said. Third Point owns about a 1.25% stake in Nestlé.

Following Mr. Loeb's previous demands, Nestlé has set a formal profit margin target, announced a $20.8 billion share buyback program and said it would use acquisitions and divestitures to drive growth. Nestlé agreed earlier this month to sell its U.S. confectionery arm.

In September, the company said it was accelerating the buyback program it originally announced in June, buying shares evenly in each of the three years to 2020, rather than backloading them in 2019 and 2020. Last week, the company said it would add to its board the chief executives of Zara owner Inditex SA and Adidas AG, as well as the former financial head of Baker Hughes, an oil-field services company owned by General Electric Co.

Mr. Loeb on Monday criticized all those moves as not being far-reaching enough, noting that the U.S. confectionery business is just 1% of Nestlé's sales, and the acquisitions have so far "been limited to a few small deals."

He also questioned Nestlé's expansion into consumer health care, saying the Vevey-based company should better explain its rationale for this.

Write to David Benoit at david.benoit@wsj.com and Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

January 22, 2018 11:57 ET (16:57 GMT)

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