CEO Mark Schneider affirms Nestle’s openness to “big deals” after L’Oreal share sale

• Net profit rose 38.2% to $18.34 billion, expected profit margin for this year will be 17%-17.5%

• Schneider said the company would consider smaller acquisitions with fewer regulatory challenges

Nestle CEO declared the company’s willingness towards engaging in a “big deal” on Thursday after the company’s net profit surged by 38.2% to $18.34 billion

In an interview with CNBC, the packaged foods company’s CEO Mark Schneider said, “We would be open to do a big deal again. Do we feel compelled to do one? No. Are we open to it? Yes.”

This statement comes as the company reasserts its growth strategy after cutting its stake in the French cosmetics business L’Oreal, last December.

The $10B cut

Nestle announced that it would reduce its stake in L’Oreal in a deal worth $10 billion, selling it back to the French cosmetic giant to capitalize on its market rally.

The company cut its stake in L’Oreal to 20.1% from 23.3% by selling 22.26 million L’Oréal shares back to the French company. Each share was priced at $452.97.

Nestle has been L’Oreal’s top shareholder since 1974 when the latter was trying to avoid nationalization. Faced with pressure from investors including Third Point LLC’s Daniel Loeb, Nestle had to sell its stake in the French company, as the investors believed it wasn’t strategic.

Also Read: Nestle lowers its stake in L’Oreal in $10 billion share sale

On Thursday, Schneider said that the company would consider smaller acquisitions with fewer regulatory challenges, alongside potential large deals.

“Buying at the right price, to me, is the starting point of successful M&A activity,” he continued. “So it’s not a change in policy, it’s simply just a reaffirmation of the fact that yes, we want to build our business and this includes acquisitions, just like internal growth.”

Data set

Nestle expects its underlying trading operating profit margin to remain broadly stable at 17.0%-17.5% this year, after a slight decrease to 17.4% last year.

Net profit rose 38.2% to $18.34 billion, prompting the company to propose a dividend of 2.80 francs per share versus 2.75 francs for 2020, slightly below expectations.

Nestle’s shares were down 1.1% in early trade but the stock inched back into the green during mid-day trading.

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(With inputs from CNBC)