Nestle announced a 20 billion-franc (€18.4bn) share buyback program, in its first strategic move after Dan Loeb's hedge fund Third Point bought a stake and urged the Swiss food company to shake up its "staid culture".
Nestle will start repurchasing shares on July 4 and the program will run through 2020, the Vevey, Switzerland-based maker of Gerber baby food and DiGiorno pizza said in a statement Tuesday. The company said it expects a net debt to Ebitda ratio of about 1.5 in 2020.
CEO Mark Schneider is reversing Nestle's policy on buybacks just days after being urged to do so by Third Point. The food maker hasn't had a repurchase program since 2014, and Mr Schneider said in February in his first public appearance as CEO that buying back stock is a lower priority than reinvesting in Nestle's business and paying dividends.
The Swiss company's reaction echoes the strategy shift Unilever announced in April after Kraft Heinz's failed takeover bid. The Anglo-Dutch company said it would buy back €5bn of stock and divest its spreads business as the unsolicited $143bn offer led CEO Paul Polman to pledge better shareholder returns.
In addition to recommending a buyback, Mr Loeb urged Nestle to sell its 23pc stake in cosmetics maker L'Oreal, eject under-performing brands and take on more debt.
Nestle lagged Europe's biggest consumer-goods stocks on Tuesday. (Bloomberg)