Nestlé Hadn’t Noticed Dan Loeb’s Demands But Will Do Some Of What He Wants Anyway

It understands why you’d think there was a connection, but allow it to disabuse you of that notion.
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By Captain USA (Own work) [CC BY-SA 3.0], via Wikimedia Commons

By Captain USA (Own work) [CC BY-SA 3.0], via Wikimedia Commons

Nestlé has a system: Every year, beginning in January, the food giant conducts a review of its capital positions. Then, in September, it reveals what it has found and announces what it plans to do about it.

September is still a hair over two months away. And yet we now know what Nestlé’s review revealed, and what it’s going to do about it, namely buy back $20 billion in stock over the next three years. “Why,” you might be saying right now, “what a coincidence: That’s exactly what Dan Loeb told them to do not two days ago!”

“Yes,” Nestlé says. “It is a coincidence.”

Nestlé said that the plans it announced on Tuesday had arisen from a regular review of the company’s capital positions — its top managers began the review in January — and that the announcement was not a response to Mr. Loeb’s activist campaign.

While the company traditionally presents such proposals in September, this time it chose to release the announcement the same day it received regulatory clearance to do so.

Yet Nestlé’s new strategic course came out only two days after Mr. Loeb’s hedge fund, Third Point, emerged as one of the company’s biggest shareholders and presented suggestions aimed at shaking up what Third Point described as a significant underperformer.

Of course, not everything is coincidental between Nestlé and Loeb. The latter thinks it should be selling some things, notably its gigantic stake in L’Oreal. But Nestlé? It’s in an acquisitive mood.

Nestlé, however, also emphasized that it was prepared to spend, and potentially spend a lot, to bolster the fast-growing parts of its business….

Such deals would be a higher priority than the stock buybacks: Nestlé said the bulk of its share repurchases would take place in 2019 and 2020 to let the company make takeovers first.

That kind of intransigence in the face of his 1.3% stake should keep old Danny boy pretty busy with those Alpine assholes. Which is why it’s good that the folks at Glenview Capital Management are filling in for him at Dow-DuPont.

Glenview Capital Management LLC recently met with leaders of both companies and pushed for changes in a plan to break the combined group into three parts, according to a letter the hedge fund sent to its investors late Tuesday.

The fund also criticized Dow’s decision to delay the retirement of Chief Executive Andrew Liveris, who was originally supposed to step down around now but now plans to stay on longer, according to the letter, which was reviewed by The Wall Street Journal.

Up until now, Loeb has been the loudest, angriest voice calling for Liveris’ head and turning a gigantic merger of two companies into a spin-off of three. Glenview’s not usually the shouting activist type but, well, it does like to see promises kept—especially promises it voted for.

Glenview’s letter raises Mr. Liveris’s tenure as a concern too, saying it voted for the deal in part because Dow had announced he would step down this month. Earlier this year, Dow said Mr. Liveris would stay on as CEO until next year as a way to see the deal through and help with the formation of the materials business.

“The change in the committed timeline that was clear prior to shareholder approval of the transaction is inappropriate and creates the appearance of conflict between personal and communal goals,” Glenview wrote.

Nestlé, Under Pressure, Plans Buyback and Perhaps Acquisitions [NYT]
Dow Investor Glenview Calls for Changes in Post-DuPont Merger Breakup [WSJ]

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