London-based activist investor calls on Danone to replace chairman and CEO Emmanuel Faber, following what he says has been a “disappointing” share price performance under his leadership at the multinational corporation. food and drink.
In a letter addressed to Michel Landel, principal independent director of Danone BN,
November 19 Bluebell Capital Partners urged the board of directors of the company to start the search for a new chief executive officer and recommended that the roles of chairman and chief executive be divided.
“Danone’s share price underperformance was motivated, in our view, by a combination of poor operating results and questionable capital allocation choices,” Bluebell wrote in the letter, a copy of which was seen by MarketWatch.
Based in Paris, Danone 0KFX,
sells a portfolio of recognized products, which range from Danone yogurt brands – Dannon in the US – including Actimel and Activia, to Evian bottled water and infant milk formulas, including Cow & Gate, in more than 130 countries across Europe, America, Asia and Africa.
Since Faber took over in 2014, Danone DANOY,
generated a total return for shareholders of 21% compared to 56% for the Stoxx Europe 600 Food & Beverage SX3P,
index, 97% for Nestlé NESN,
and 101% for Unilever ULVR,
“In our opinion, this does not reflect the quality of the group’s assets,” Bluebell said in the letter, which was first reported by the French business magazine. Challenges.
Danone shares rose 2.16% on Tuesday mid-morning in Europe.
Bluebell declined to comment. It did not disclose the size of its stake in Danone, which should be reported to the French financial regulator if it crosses the 5% threshold.
“We appreciate a constructive dialogue with all of our shareholders. Danone’s management team has a strong focus on creating long-term sustainable value for our shareholders, ”a company spokesperson said in an emailed statement to MarketWatch.
In November, Faber announced a reorganization to reshape Danone for the post-COVID world.
This included cutting 2,000 jobs, or 2% of its global workforce, and conducting a strategic review of its brand portfolio, which it said would start with Vega, the plant protein powders brand. it acquired as part of its $ 10.4 billion buyout of a US organic producer Whitewave, as well as 500 million euros ($ 680 million) of assets in Argentina. Together, the two activities represent around 2% of the group’s sales.
“The first step of this plan includes an ambitious adaptation plan to bring Danone back to profitable growth in less than 12 months, from H2 2021 and for our operating margin to return to its pre-COVID levels of over 15% by 2022, ”the company spokesperson said.
On March 25, he will brief investors on how he plans to accelerate profitable sales growth towards his mid-term goals.
Barclays analysts said investors would like clarification on Danone’s water division, which was down 28% in the second quarter of 2020 and 13% in the third quarter, as the COVID-19 pandemic closed bars and restaurants. restaurants – a key source of income. Rival Nestlé announced a strategic review of its North American water brands in June of last year as it seeks to focus on high-end brands.
“We believe it is imperative that management give assurance that margins can quickly return to double digits. The new foreclosure restrictions will likely mean the margin recovery may take longer, ”Barclays equity research team said.
Bluebell also highlighted concerns about Faber’s dual focus on financial performance and environmental and social goals, saying the company “has failed to strike the right balance between creating shareholder value and sustainability. “
In June 2020, Danone became the first listed company to adopt the “Business to Mission” status in France, which officially incorporates environmental, social and governance objectives (ESG) in the articles of association.
Bluebell is not the first activist to take a stake in Danone. In 2012, Nelson Peltz’s Trian Partners built a 1% stake in the company in the company and campaigned for change, selling the stake a year later after the departure of Franck Riboud, then CEO of the company. Five years later, activist hedge fund Corvex, led by Keith Meister, took a $ 400 million participation in the French group, “but again that really didn’t change anything,” Barclays analysts said.
However, they noted that Bluebell, which is led by the former CEO of Italian jeweler Bulgari, Francesco Trapani, along with former investment bankers Giuseppe Bivona and Marco Taricco, has had some success in waving for change. in other companies such as the airline Lufthansa LHA. ,
and the luxury fashion house Hugo Boss BOSS,
In March of last year, the fund opposed the proposal $ 2.1 billion acquisition by the owner of Regal-cinema Cineworld CINE,
Toronto rival Cineplex CGX,