Nestle SA (NSRGY) shares trading at an all-time high Thursday after the consumer brands giant said it had entered exclusive talks with two private equity groups to sell its skin care business for more than $10 billion.
A unit of the Abu Dhabi Investment Authority, as well as Switzerland-based EQT Private Equity Partners, will negotiate with Nestle as part of a plan to purchase the Skin Health division for CHF10.2 billion ($10.12 billion). Skin Health, which includes the Proactiv brand, had sales of CHF2.8 billion last year, Nestle said, and centers on prescription, aesthetics and consumer care. The move follows shareholder pressure last year on CEO March Schneider to boost returns and trim the global group's sprawling business divisions.
"The proposed transaction will be subject to employee consultations and approval of regulatory authorities and is expected to close in the second half of 2019," Nestle said in a brief statement. "The company will provide an update on the use of proceeds and its future capital structure at that time."
Nestle shares were marked 0.7% higher in early Zurich trading and changing hands at CHF99.43 each, an all-time high and a move that takes the stock's year-to-date gain past 24.5%.
Two years ago, U.S.-based activist investor Third Point LLC built a 1% stake in the the world's biggest food company, worth around $3.5 billion at the time, and said it wants management to pursue a series of options it argues would unlock shareholder value, including the sale of its 23% stake in luxury goods maker L'Oreal SA (LRLCY) .
Shortly after Third Point revealed its stake, Nestle said it would buyback around $21 billion in shares over the next three years following criticism from the U.S. hedge fund and indicated it may look at acquisitions in key growth areas.
Nestle said it launched a program to increase returns earlier this year which included a "comprehensive review" of its capital structure and priorities.
The review, the company said, determined that capital spending should focus on high-growth sectors such as coffee, petcare, infant nutrition and bottled water as well as consumer healthcare. It also said it would "continue to assess opportunities for margin improvement" through selective cost-cutting.