Loeb's third point takes a new approach in the battle with Nestle

BOSTON (Reuters) – For a year, billionaire hedge fund manager Daniel Loeb quietly watched from far away Nestlé SA trying to boost its business. But his patience has diminished and he told associates and his own investors that the time has now come for the world's leading food company.

On Sunday, Loeb sent a letter and a 34-page presentation to the President and CEO of Nestle them to sell more companies that do not match and unravel its business structure.

Loeb criticized the company's "confused strategic approach" and demanded that the company be divided into three units: drinks, nutrition and groceries. Loeb wants the company to focus on "nutrition, health and wellness" and sells parts that are not going, including its stake in the French personal care company L Oréal SA.

Nestle said Monday, in response to Loeb's public criticism, that its "board of directors and management take seriously the prospects of all shareholders and welcome their continued contribution." The company refused to elaborate.

With Nestlé's stock price down 8% over last year, Loeb pointed out that he was not satisfied with the redemption efforts of his shares and that the sale of its confectionery in the United States was not far enough.

He also launched a website, www.Nestlenow.com, to push his case publicly, scoring only the third time his company's $ 18 billion (£ 13.7 billion) Third Point LLC broke through such a step in 23 years. About a year ago, Third Point invested approximately $ 3 billion in Nestlé.

For some, the moves suggest an aggressive hedge fund manager based in the United States taking his gambling book to Europe where shareholders have been appeased with slower progress for longer. For Loeb's customers and a few friends, the campaign illustrates just how much the 56-year-old manager has transformed not only his company but himself since the 2008-2009 financial crisis when Third Point nearly closed its doors.

"About ten years ago, Dan Loeb reportedly criticized the CEO and may have called names and threatened his job," said an investor who asked not to be identified because that the funds are private.

Six years ago, Loeb targeted Yahoo's CEO Scott Thompson at Stonehill College, discovering contradictions in his resume that ultimately cost him his job. Ten years earlier, Loeb was writing to Potlatch Corp CEO Pendleton Siegel about his "gruesome management record and inexplicable carelessness."

The message to Nestlé's Swiss headquarters and its German CEO, Mark Schneider, was more measured on how to raise the stock price even higher and no personal attacks or embarrassing anecdotes.

KINDER, GENTLER?

Investors agree that Loeb is trying to take a different approach in recent times, including the need to galvanize other investors to support his calls for change and for management to co-operate. with him. In the end, according to several investors, Nestle belongs to its shareholders and if they are not satisfied with the progress of management, something must be done.

"Dan is talking about the power of the argument," said Ken Squire, who follows activists from the 13D Monitor research firm. "And here he offers an alternative argument to shareholders."

With some, the message already resonates.

Another investor who holds 8 million Nestlé shares but asked not to be publicly identified said Monday that his company is sending a letter to Schneider and his team to lend their support to Loeb.

"The board should be wondering if Loeb's analysis is correct and not to worry about his tactics and whether or not he increases the pressure," said Loeb. ;investor.

True, there are critics who say that Loeb could publicly push Nestlé now because his $ 3 billion stance has not delivered the kind of salary that Loeb or his investors want.

In the first six months of 2018, Loeb's Third Point Partners fund reported 1%, an investor said. The average hedge fund lost about 1% during this period, according to data from Hedge Fund Research.

But the average annualized returns of Loeb are still among the best in the industry, with an average of 18% per annum for the Third Point Partners Fund. Institutional Investor has just been named Third Point hedge fund manager of the year. And Squire said its data shows that Third Point yields about 21% on average on positions where it took a stake of 5% or more.