Nestle stock surges amid reports US hedge fund takes stake

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Shares in Swiss food group Nestle jumped to a record high after it gained its first activist investor in Dan Loeb's hedge fund Third Point, which demands the world's largest food company address its "staid culture".

Nestle said earlier this month that it may sell its $900 million-a-year USA confectionery business in the Swiss food group's latest effort to improve the health profile of its sprawling portfolio.

In a letter, Third Point outlined several changes Nestle could make, including improving margins, innovating in its core business and selling noncore assets such as its 23% stake in French cosmetics company L'Oréal.

Mark Schneider, Nestle's chief executive since January, has been trying to reignite growth at the company.

A Nestle spokesperson said in an email to Food Dive that "we keep an open dialogue with all of our shareholders and we remain committed to executing our strategy and creating long-term shareholder value".

Nestle said earlier this month that it might sell its $900 million-a-year USA confectionery business in its latest effort to improve the health profile of its sprawling portfolio.

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Third Point also said the firm should set more aggressive profit targets, and return money to investors by buying back shares. The KitKat maker reported a trading operating margin of 15.3% in 2016 and Third Point's suggestion represents margin improvement of up to 400 basis points, ahead of the company's own target for 200 bps in structural cost savings by 2020, some of which the company plans to reinvest to fuel organic growth.

A spokeswoman for Bennink said he was not available for comment.

Loeb made the announcement in a letter to investors on Sunday after his company bought 40 million Nestle shares. "Now with Mr. Schneider, one of his top priorities was to improve shareholder communication and investor relations".

However, analysts from Jefferies said Nestle would be reluctant to be seen to be dancing to Third Point's tune.

Bennink later cemented his reputation when he oversaw the spin-off of Sara Lee's worldwide coffee arm and also ran the business, which is now controlled by JAB Holding. Additionally, Third Point doesn't necessarily have a large enough stake in Nestle to truly affect change.

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