Activist investor Third Point continues to push for Nestlé to monetize its long-held stake in beauty giant L’Oréal.
In a quarterly letter to shareholders dated Jan. 22, Third Point said that the stake is not aligned with Nestlé’s core businesses. The firm, run by Dan Loeb, owns a 1.25 percent stake in Nestlé, which in turn owns a 23.3 percent stake in L’Oréal.
“Nestlé needs to conduct a thoughtful review of its financial stake in L’Oréal,” the firm said. “While the investment, made in 1974, has produced excellent returns historically, that alone is not a sufficient reason to maintain the status quo. Today, it is simply unclear how owning a minority stake in a beauty business makes Nestlé a stronger ‘nutrition, health and wellness’ company. We continue to believe that this financial investment ought to be monetized and that there are better uses for this capital.”
Instead, Nestlé should be focusing on categories like coffee, pet care, water and nutrition, according to Third Point, which are growing faster than other areas of the company’s portfolio and are “on trend with modern consumers.”
Nestlé’s brands include Alpo, Gerber, Poland Spring and Lean Cuisine. L’Oréal’s holdings includes Maybelline, Lancôme, Kiehl’s and other beauty brands.
This isn’t a new stance for Third Point, which has advocated for Nestlé to shed its L’Oréal stake since it revealed a significant holding in the food and beverage company last June. Nestlé has lowered its stake in L’Oréal over the past few years, bringing it down to 23.3 percent in 2014 from 29.4 percent.
Unrelated to L’Oréal, Third Point also said Nestlé should consider getting out of the skin health business. “Forays into ‘skin health’ seem unrelated to Nestlé’s core business and likely a costly mistake that should be unwound,” the firm said.
A Nestlé spokesperson said, “We keep an open dialogue with all of our shareholders and we remain committed to executing our accelerated value creation strategy. Nestlé’s board and management welcome the continued input of all shareholders.” Third Point declined to comment beyond the letter.