Nestle stock surges amid reports US hedge fund takes stake

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

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

"It is rare to find a business of Nestlé's quality with so many avenues for improvement", Third Point said in a letter to investors quoted by The Wall Street Journal.

Swiss food and drink giant Nestle has become the latest target for activist U.S. hedge fund Third Point, which has taken a one percent stake in the company and demanded major changes, including offloading its large holding in L'Oreal.

Nestle needs 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 reportedly said in the letter.

Third Point, which disclosed its Nestle position in a letter to investors, also said the food company should sell its 23 percent stake in French cosmetics firm L'Oreal.

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The move comes as Nestle's new Chief Executive Officer, Mark Schneider, aims to boost the company's health strategy, as well as focus on businesses that are growing fastest such as coffee and pet food.

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The hedge fund said that Nestle should set a formal margin target of 18 per cent to 20 per cent by 2020 in order to help improve productivity.

It also urged Nestle to rationalise its stable of brands - now around 2,000 in food and beverage and health science - to focus on growth.

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Activist investors often retain operational experts to advise on investment campaigns, with an eye to nominating them for a board seat in the future - a role Third Point may have in mind for Bennink. The hedge fund also took a stake in German utility EON SE, arguing that the business was "misunderstood by the market and attractively priced".

Shares in the Swiss-based global food giant surged by just about 4% on Monday morning in reaction to the news.

"We are seeing more opportunities in Europe because of strong and improving economic data", Third Point wrote in an April 27 letter to investors. Danone, the world's biggest yogurt maker, has gained 26 percent in Paris.

Vontobel analyst Jean-Philippe Bertschy said Third Point's suggestions echoed proposals made by other shareholders for years. "We have offered our views in productive conversations with management, which we expect will continue".

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