Daniel Loeb the billionaire activist investor on Sunday increased pressure on Nestle SA through a letter urging the company’s board to become faster, sharper and bolder in spinning off its businesses and untangling its management structure he labeled complex.
The letter said it was a call for urgency, rather than one of incrementalism. It arrived with a presentation of 34 pages with critiques and recommendations.
Third Point, the hedge fund of $18 billion, which invested over $3 billion in the food company, also launched a new website that pushes its case.
The letter from Loeb demanded that Nestle conduct a spinoff of more of its businesses that are not fitting into its current strategy including frozen foods, ice cream and confectionary; divide internally into three separate divisions – nutrition, grocery and beverages; and added a new outside board member to its new food and beverage segment.
Loeb’s letter stated that each of Nestles’ divisions needed to have a CEO of its own, regional structure as well as marketing heads. This would help to simplify the overly complex group structure.
Nestle did not make an immediate comment regarding the letter.
The demands by Loeb come about one year after his initial investment in Nestle and during a time that significant activity involving mergers is taking place across the food industry.
For several months, the investor, who previously pushed to have changes made at Dow Chemical and Yahoo along with other companies, watched and made periodical supportive comments publicly about the new CEO at Nestle Mark Schneider.
However, the new letter was clear Third Point is not willing to maintain its critiques behind closed doors any longer.
The letter criticized the slow growth in sales at Nestle, declining share price and the failure to sell off more parts of the company that do not fit into the nutrition, health and wellness.
The biggest concern the fund manager has was the corporate structure with the strategic directions under the charge of the board.
Early in 2017, the Swiss-based company hired its new CEO, who is German, as its first CEO who is non-Swiss in close to 100 years. He won praise for the overhaul of Fresenius Medical Care.
However, Paul Bulcke the former CEO remained the board chair at Nestle which has raised more than one eyebrow amongst experts in governance. Insiders have said that following months with the reins, Schneider has still not brought in his own team.