Hedge Fund Third Point LLC, Dan Loeb’s hedge fund, on Sunday announced that it has taken more than 1 percent stake in Switzerland’s Nestle SA and encouraged the food maker to sell non-core businesses, increase share buyback and improve margins.
Third Point now owns roughly 40 million shares in Nestle, about 1.3 percent stake, according to a letter to its investors posted on its website. This is one of the largest stake ever taken by the hedge fund, who has also invested in Yahoo and Japan’s Sony Corp in recent years. The stake is worth about $3.5 billion.
"We feel strongly that in order to succeed, Dr. Schneider will need to articulate a decisive and bold action plan that addresses the staid culture and tendency towards incrementalism that has typified the company's prior leadership and resulted in its long-term underperformance," Third Point wrote in the letter.
Nestle shares rose as much as 3.9 percent in Zurich, as investors are expecting that the hedge fund will accelerate the changes in the world’s largest packaged foods company.
Third Point urged Nestle to sell its 23 percent stake in cosmetics maker L’Oreal SA. The hedge fund also said that Nestle should set a formal margin target of 18 percent to 20 percent by 2020, from about 15 percent in 2016. What’s more, the hedge fund recommends the food maker to boost its leverage ratio to start stock buybacks program.