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Nestlé can pre-empt Dan Loeb with refreshed board

October 4, 2017
Consumer Packaged Goods

Nestlé can pre-empt activist Dan Loeb’s next move. The $265 billion Kit Kat maker’s directors are light on consumer and digital expertise.

Half the 14 of them are from Switzerland, the company’s home market but one that’s worth just 2 percent of sales. Nestlé’s latest revamp plans are far from radical and the Third Point founder may next seek boardroom changes. Nestlé could head off a fight by beating him to it.

To be fair, newish Chief Executive Mark Schneider is Nestlé’s first externally hired boss for nearly 100 years. And the company has added former Xerox and Credit Suisse executives to its board in recent years. Thanks to these additions, the average independent-director tenure has fallen to about six years, less entrenched than is implied by the nine-year average at U.S. consumer giant Procter & Gamble, where activist Nelson Peltz is trying to get a seat. But there is room for improvement.

Paul Bulcke, Schneider’s predecessor, is the 10th former CEO to act as chairman since the merger of Nestlé and the Anglo-Swiss Milk Company in 1905. That promotes stability but can also slow needed change. Meanwhile, Schneider’s new goal for margin expansion depends on turning around Nestlé’s food business and boosting its web sales. Yet outside expertise in the consumer and online arenas is notably lacking on the board.

Loeb, who revealed a $3.5 billion stake in Nestlé in June, hasn’t yet gone public with any of his trademark aggressiveness even though it’s Third Point’s biggest-ever single investment. However, he has retained an adviser who could easily become a credible board nominee. Jan Bennink’s CV includes time at Coca-Cola, Danone, D.E. Master Blenders and Numico.

Getting someone like Bennink nominated would be easy enough. Any investor holding at least a 0.15 percent stake can request an agenda item for Nestlé’s annual general meeting, provided they inform the board 45 days beforehand. With the next meeting scheduled for April 12, 2018, Loeb would have to move by late February.

Companies don’t like proxy fights, though, especially conservative groups like Nestlé. In 2015, U.S. chemicals producer DuPont won shelter – admittedly only temporarily – from Peltz’s pressure by adding directors of its own choosing. With its board in need of new skills, Nestlé could do something similar for its own benefit. Being a step ahead of Loeb would be a handy side-effect.

By Carol Ryan

Source: Reuters

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