NEW YORK (Reuters Breakingviews) - Nestle gives Dan Loeb a fresh peak to climb. The pushy billionaire boss of hedge fund Third Point has set his sights on the Swiss producer of everything from Alpo to Kit Kat and Perrier. Leviathan consumer groups have proven to be tough targets of late, both for activists and suitors. Loeb clearly likes a challenge, though, evidenced by his efforts to agitate Japanese companies to change.
The $3.5 billion investment in Nestle, with its headquarters on the north shore of Lake Geneva, is Loeb's biggest. He reckons the $263 billion goliath should dump its 23 percent stake in L'Oreal – which Breakingviews said in February there "was no good reason" for it to hold – and borrow more money to buy back shares. The company's "staid culture and tendency towards incrementalism" also need addressing, Loeb wrote in a letter to his investors on Sunday.
Sprawling conglomerates often attract attention, but can be hard to push around. Nelson Peltz, for example, never managed to break up Pepsi. Earlier this year, his Trian Fund turned its attention to $230 billion Procter & Gamble, where Bill Ackman's Pershing Square had ventured earlier with little to show for it. Likewise, Ackman started pestering Irene Rosenfeld, the chief executive of Mondelez, where Peltz also was an investor, but the stock price hasn't budget since Ackman bought a $5.5 billion stake in August 2015.
Corporate muscle has run into strong defenses, too. Unilever, the Anglo-Dutch maker of Hellmann's mayonnaise, in February swatted off a $143 billion takeover approach from Kraft Heinz, backed by Warren Buffett and the Brazilian investors at 3G. And Hershey rejected unwanted advances from Mondelez last year.
Loeb is obviously undaunted. He dared into the entrenched boardrooms of corporate Japan, on the back of initiatives spearheaded by Prime Minister Shinzo Abe. The Third Point boss scored some wins, including wringing higher payouts out of robot-maker Fanuc. Despite walking off with a profit from an investment at Sony, however, the Japanese electronics heavyweight rejected his demands to spin off its entertainment business.
Nestle is a tastier target. Ulf Mark Schneider is still settling into the CEO's seat. He started by scaling back sales growth targets, a pattern under his predecessor. As the bedrock of Switzerland's multinational success, Nestle presents a formidable mountain for Loeb. Yet he may find it somewhat movable.
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