Nestle SA (NSRGY) shares surged in early trading in Zurich to value the world's biggest food company at an all-time high after activist investor Third Point revealed it had built a stake in the group and pressed for asset sales in increased buybacks.
Shares in the Vevey, Switzerland-based group rose 3.7% in the opening 30 minutes of trading in Zurich to change hand at Sfr85.15 each, extending their year-to-date gain under new CEO Ulf Mark Schneider to 16.6%. The company how has a record market capitalisation of Sfr265 billion ($273.5 billion).
The gains follow news over the weekend that Dan Loeb's Third Point LLC hedge fund had built a 1.3% stake in Nestle, worth more than $3.5 billion, making it one of the company's top 10 shareholders. The activist investor is calling for Nestle to shed assets and increase share buybacks, including the sale of its 23% stake in L'Oreal SA (LRLCY) .
"Despite having arguably the best positioned portfolio in the consumer packaged goods industry, Nestle shares have significantly underperformed most of their U.S. and European consumer staples," Third Point said in a letter to investors on Sunday June 25. "It is rare to find a business of Nestle's quality with so many avenues for improvement."
Third Point said it hoped to have "productive" conversations with Nestle management, but described the company's culture as "staid" and noted a "tendency towards incrementalism that has typified the company's prior leadership and resulted in its long-term underperformance."
Nestle announced June 15 that it's exploring strategic options, including a sale, for its U.S. confectionery business, which could fetch over $1 billion, a move that Third Point said is encouraging.
Schneider, the first outsider to leader the group since 1922, has been deemed "a bit of an M&A junkie," by analysts at Joh. Berenberg, Gossler & Co. KG. With Schneider at the helm, Germany's Fresenius SE made more than a dozen acquisitions and was said to be the leading bidder to buy Pfizer Inc.'s pump and devices business.