“The L’Oréal stake could be divested via an exchange offer for Nestle shares that would accelerate efforts to optimize its capital return policies, immediately enhance the company’s return on equity, and meaningfully increase its share value in the long run,” said Third Point, which retained former Sara Lee Corp. Executive Chairman Jan Bennink to advise on the investment.

A L’Oréal spokeswoman declined to comment.
Consumer companies have become popular targets for activist shareholders. In 2015, billionaire hedge fund manager Bill Ackman amassed a $5.6 billion stake in snack giant Mondelez International Inc. and called for management to improve the company’s performance, leading to cost cuts. Procter & Gamble Co. attracted Nelson Peltz’s Trian Fund Management LP, which revealed its position in the consumer-products maker in February and has since amassed a stake valued at about $3.3 billion, according to its latest regulatory filing.

Loeb is aiming high with Nestle as activist investors enjoy a resurgence of client inflows and returns. Third Point’s flagship fund gained almost 10 percent in the first five months of 2017, part of an industrywide rebound that saw event-driven funds return 5.6 percent on an asset-weighted basis, the most among the main strategies tracked by Hedge Fund Research Inc.

Eoin Treacy's view

Nestle has a large number of businesses and, in order to remain competitive, needs to reorient itself towards growth sectors in its largest developed markets. It is interesting however that the thrust of the activism is towards highlighting the significant cross ownership Nestle has in other European companies. 



Nestle, L’Oréal and Sanofi, which are all Autonomies, might be in quite different sectors but the pattern of ownership represents a potent source of potential income boosts from the perspective of activist investors. All three shares exhibit an upward bias but also only represent a relatively small proportion of some of the crossholdings evident within Europe. 

There are also signs that Nestle is seeking to further focus its efforts on pet care, water, infant nutrition and frozen foods. This story from Fortune opines the company is investigating putting its US confectionary business up for sale. 

From a broader perspective the Europe STOXX 600 has been ranging mostly below 400 since 2000. The Index has paused below that level again over the last few weeks as it unwinds it short-term overbought condition. A sustained move below the trend mean would be required to question to medium-term scope for a successful upward break.