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Dan Loeb's Activist Campaign Against Nestle Goes Against Decades Of History

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Dan Loeb's Activist Campaign Against Nestle Goes Against Decades Of History
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Activist investor Daniel Loeb's Third Point disclosed over the weekend a 3.28 billion Swiss franc ($3.4 billion) stake in the Switzerland-based giant Nestle SA (ADR) (OTC: NSRGY), best known for its chocolate products and beverages offerings.

Third Point's stake in Nestle marks one of the biggest investments the fund has ever made and represents a stake of more than 1 percent in the company. The fund said in a letter to Nestle's investors that management should consider divesting its 23 percent stake it owns in the cosmetics company L'Oreal SA (ADR) (OTC: LRLCY), Bloomberg reported.

In turn, L'Oreal owns a 9.4 percent stake in Sanofi SA (ADR) (NYSE: SNY) — worth around $11.6 billion — and if Nestle proceeds with Third Point's wishes, it would represent a testament to the power of activist investors in Europe, Bloomberg added.

The History

Nestle's stake in L'Oreal dates back more than four decades and came at a time when France's Socialist party wanted the government to take over the country's biggest companies, Bloomberg further stated. But Loeb is far from the first to call on Nestle to sell its stake in L'Oreal, as many argued the position doesn't make any strategic or financial sense to continue holding the stock today.

Nestle also holds an agreement with L'Oreal's biggest investor, Liliane Bettencourt's family, who still sets rules on what Nestle can and can't do with its stake. While some of the provisions expired three years ago it nevertheless pits one of Wall Street's biggest activist investors against European politics and one of the richest families.
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