Shares in Swiss food group Nestle jumped to a record high after it gained its first activist investor in Dan Loeb's hedge fund Third Point, which demands the world's largest food company address its "staid culture".
With its $3.5 billion stake, Third Point puts pressure on Mark Schneider, Nestle's first outside chief executive officer in almost a century, as he prepares to reveal his strategy at an investor day in September.
While he’s shown investors a glimpse of his plan by considering a sale of US confectionery, Nestle may now have to scour its more than 2,000 brands across 191 countries and act more decisively and quickly on sub-par businesses.
"Nestle has arguably been lackadaisical and complacent, and underperformed its potential," Andrew Wood, an analyst at Sanford C Bernstein, wrote in a note. "It might now be stirred into action by an external force."
Nestle said it maintains an open dialogue with all shareholders and is committed to executing its strategy. Beyond that, it has no specific comment, a spokesman said.
The Swiss company’s shares closed the day up 4.3 per cent at 86.65 Swiss francs.
Here are some Nestle holdings that Schneider might review:
- L'Oreal: Loeb called on Nestle to sell its 23.2 per cent stake in the Paris-based cosmetics giant. A sale of that holding, which is valued at about $27 billion, would allow the KitKat maker to boost share buybacks or make acquisitions
- Confectionery: UBS analyst Pinar Ergun questions the fit of the division to Nestle's nutrition, health and wellness strategy. The business, which contributed about 10 percent of sales last year, could be worth 20 billion francs to 26 billion francs, he estimates
- US prepared dishes and cereals: Divesting these units, along with confectionery, could generate 40 billion Swiss francs ($41 billion), Jon Cox, an analyst at Kepler Cheuvreux, wrote in January
- Herta meat products: This business could fetch 1.5 billion francs, estimates Bank Vontobel's Jean-Philippe Bertschy. He expects continued divestments of local confectionery and water brands with 10 million francs to 50 million francs in revenue
- Divestments could give Nestle 100 billion francs for acquisitions, according to Kepler's Cox. Nestle could try to acquire Danone SA, Abbott Laboratories' medical-nutrition unit or Fresenius SE's clinical-nutrition business, he said.