The Nespresso owner said it won’t increase its 23% investment in the French cosmetics maker and wants to keep all other options open. Nestle said it won’t renew a shareholder pact with the Bettencourt family, which also owns a stake.
“We remain committed to the company that has given us very good returns over the years,” Nestle said, adding it wants to keep constructive relations with the Bettencourts. L’Oreal’s sales growth is stronger than Nestle’s, providing a helpful tailwind amid bleak prospects for mass-market food and beverage brands.
Nestle’s update on the stake came as the company said revenue rose 2.4% in 2017 on an organic basis, below analysts expectations for a 2.7% increase. Schneider is aiming for 2% to 4% growth this year.
Since taking over about a year ago, the CEO has stepped up merger-and-acquisition activity, buying Canadian dietary supplements maker Atrium Innovations for US$2.3 billion and jettisoning Nestle’s ailing US chocolate business. Nestle said it plans to continue “active portfolio management” in a disciplined manner.
“The sweet spot is in small to mid-sized deals, but we don’t want to rule out anything,” Schneider told reporters.
Gerber insurance
Schneider also accelerated Nestle’s share buyback program in response to activist Dan Loeb taking a US$3.5 billion position in the company. On Thursday, Nestle said it may sell a life-insurance business that it acquired when it bought the Gerber baby food brand in 2007. The unit had revenue of 840 million francs (US$906 million) last year.
Loeb has been pressuring Nestle to consider selling its stake in L’Oreal, an investment that dates back to 1974. Such a move could prompt a broader realignment of shareholdings in some of Europe’s biggest companies, including French drugmaker Sanofi, in which L’Oreal holds a stake.
L’Oreal said last week that it’s ready to buy out Nestle’s holding and has the resources to do it. Under the shareholder agreement, neither the Swiss company nor the Bettencourt family are permitted to increase their stakes in L’Oreal until March 21 – six months after the death of matriarch Liliane Bettencourt.
Schneider, the first outsider to run Nestle in almost a century, beat his goal of improving the underlying trading operating margin by at least 0.2 percentage points, excluding currency shifts. The margin rose 0.5 percentage points.