Log in
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Dynamic quotes 
  1. Homepage
  2. Equities
  3. United Kingdom
  4. London Stock Exchange
  5. GlaxoSmithKline plc
  6. News
  7. Summary
    GSK   GB0009252882


SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

Nestle plan hailed as only the start of Schneider's shake-up

06/29/2017 | 04:42am EDT
Nestle CEO Schneider speaks during Nestle shareholders meeting in Lausanne

ZURICH/LONDON (Reuters) - Nestle's (>> NestlÚ) plan to shore up its capital structure, announced only days after being thrust into the spotlight by activist shareholder Third Point, was received by investors as a precursor to bigger changes under the company's new leadership.

ZURICH/LONDON (Reuters) - Nestle's (>> Nestlé) plan to shore up its capital structure, announced only days after being thrust into the spotlight by activist shareholder Third Point, was received by investors as a precursor to bigger changes under the company's new leadership.

Shares in the world's largest foodmaker rose as much as 2 percent on Wednesday, close to the record high touched on Monday after the New York-based hedge fund disclosed a $3.5 billion stake and urged Nestle to buy back shares, set a target for margin growth and shed non-core assets including its stake in L'Oreal (>> L'Oréal).

Investors did not have to wait long for a response, with Nestle announcing late on Tuesday that it would launch a 20 billion Swiss franc ($20.8 billion) share buyback program while leaving room for near-term acquisitions.

Nestle also said it would continue adjusting its portfolio and assess opportunities to boost profit margins, stopping short of setting a firm target. It added that the measures were the result of a review instigated at the start of the year after Mark Schneider took over as chief executive.

The moves were welcomed by stakeholders large and small.

"This is a new era for Nestle and I'm extremely positive on the prospects for internal and external growth," said Carine Menache, who runs a Monaco investment firm that owns Nestle shares. She and UBS analysts said the buyback should lift earnings by 6 percent, while increased merger and acquisition (M&A) activity could provide a further boost.

"Nestle may have a poor track record for M&A, but the new CEO, Schneider, is now in charge and he has a great track record," she added.

Reaching a 19 percent operating margin, the midpoint of Third Point's recommendation, would lift earnings by another 8 percent, according to UBS, which said Nestle shares now offered the greatest opportunity for growth of all the European packaged goods companies it covers, bolstering its "buy" rating.

Of Nestle's plan, which they described as "responsive but not reactionary" to Third Point, UBS said: "We think this sends a strong message to the markets - expect more to come."


The global packaged food sector is convulsing as its main players struggle with slowing growth, changing consumer habits and the growing influence of global investment firm 3G Capital. 3G's Kraft Heinz (>> The Kraft Heinz Company) launched a surprise $143 billion takeover bid for Unilever (>> Unilever) in February, sparking a deep review and new agenda at the target company.

Many of the demands laid out in Third Point's letter echo the steps Unilever took in the wake of the Kraft bid.

Investors said the biggest omission from Nestle's response was any reference to its 25 billion euro ($28.4 billion) stake in L'Oreal, which dates back to 1974, when the French heiress Liliane Bettencourt sold a large part of her holding to Nestle.

That omission and lack of a margin target means the announcement may not completely satisfy Third Point, which is controlled by billionaire investor Daniel Loeb. Third Point has declined to comment on the announcement at this stage and Nestle is expected to say more at its investor day in September.

"It's only a start," said Mirabaud Asset Management's Nicolas Burki. "It will not be enough."

Nestle has long touted the L'Oreal stake as value-creating, and a source familiar with the company's thinking said there was no change to that view.

The big question, however is what Nestle would do with the cash, besides buybacks, if it sold down the L'Oreal stake.

The company did say its capital spending would be focused on higher-growth categories of coffee, pet food, baby food and water. It added consumer health to the list of priorities, potentially making it a competitor to the likes of Johnson & Johnson (>> Johnson & Johnson) and GlaxoSmithKline (>> GlaxoSmithKline).

However, EFG Asset Management's Urs Beck cashed out of his Nestle position on Monday's price spike and is skeptical that it can find acquisitions big enough to move the needle for a company with $93 billion in sales.

"The ship is just too big to be steered into different waters through portfolio management," he said.


Nestle is Europe's most valuable company, with a market value of $263 billion last week, before Loeb's position was made public, adding $10 billion in one day.

The positive reaction most likely reflects the bullishness of long-term investors rather than event-driven hedge funds looking for quick turnarounds, says Michael Wegener at Case Equity Partners in Hong Kong.

Wegener said he doubts that many arbitrageurs have moved into Nestle's stock yet, since the Loeb stake remains too soft a catalyst at this stage.

But one London-based manager of an event-driven hedge fund with no involvement with Nestle described the situation as a victory for both sides.

"I suspect (Third Point's) presence actually helps Schneider with his change agenda," said the manager, who asked not to be named. "I suspect the buyback is not enough, but Third Point is unlikely to feel the need to get shouty."

Swiss activist shareholder Rudolf Bohli said that Loeb, known for campaigns against Yahoo, Sony Corp and the Dow-DuPont merger, is on the right track.

"Loeb has set the right tone and his agenda is correct," said Bohli, who recently exited GAM Holding with a profit after failing to replace the financial company's chief executive.

(Additional reporting by Angelika Gruber and Paul Arnold in Zurich; Writing by Martinne Geller; Editing by David Goodman)

By Silke Koltrowitz and Maiya Keidan

ę Reuters 2017
Stocks mentioned in the article
ChangeLast1st jan.
CHANGE INC. -0.48% 2684 End-of-day quote.-23.86%
FORBO HOLDING AG -0.76% 1830 Delayed Quote.21.48%
GLAXOSMITHKLINE PLC -0.04% 1399.2 Delayed Quote.4.31%
JOHNSON & JOHNSON 0.46% 172.66 Delayed Quote.9.21%
SWISS RE LTD -0.07% 83.68 Delayed Quote.0.48%
07/26GLAXOSMITHKLINE PHARMACEUTICALS' : Consolidated Net Profit Climbs in Fiscal Q1
07/26GLAXOSMITHKLINE : Shingles Vaccine Gets Expanded US Nod For Immunocompromised Ad..
07/26BIONTECH : Plans Development of First mRNA-Based Malaria Vaccine
07/26GLAXOSMITHKLINE ( '') (FORM 6 K : GlaxoSmithKline plc (the 'Company') (Form 6-K)
07/26GLAXOSMITHKLINE : BioNTech aims to develop mRNA-based malaria vaccine
07/26GLAXOSMITHKLINE : Wins US FDA Approval for Shingrix for Shingles Prevention in I..
07/26ASTRAZENECA : BioNTech aims to develop mRNA-based malaria vaccine
07/26GLAXOSMITHKLINE : Shingrix approved in the US for prevention of shingles in immu..
07/26GlaxoSmithKline plc Announces US Food and Drug Administration Approval for Sh..
07/26GlaxoSmithKline Gets FDA Approval for Shingles Vaccine
More news
Sales 2021 33 019 M 45 826 M 45 826 M
Net income 2021 3 385 M 4 698 M 4 698 M
Net Debt 2021 21 463 M 29 789 M 29 789 M
P/E ratio 2021 20,4x
Yield 2021 5,72%
Capitalization 70 017 M 96 771 M 97 177 M
EV / Sales 2021 2,77x
EV / Sales 2022 2,59x
Nbr of Employees 94 066
Free-Float 92,2%
Duration : Period :
GlaxoSmithKline plc Technical Analysis Chart | GSK | GB0009252882 | MarketScreener
Technical analysis trends GLAXOSMITHKLINE PLC
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 27
Last Close Price 13,99 GBX
Average target price 1 518,63 GBX
Spread / Average Target 10 754%
EPS Revisions
Managers and Directors
Emma N. Walmsley Chief Executive Officer & Executive Director
Iain James Mackay Chief Financial Officer & Executive Director
Jonathan Richard Symonds Non-Executive Chairman
Karenann K. Terrell Chief Digital & Technology Officer
Hal V. Barron Executive Director & Chief Scientific Officer
Sector and Competitors
1st jan.Capi. (M$)
JOHNSON & JOHNSON9.21%452 602
ROCHE HOLDING AG11.50%327 852
PFIZER, INC.13.58%234 040
NOVARTIS AG-0.17%221 954