1/18/2021
Bluebell Capital Takes Aim at Danone
Financial Times (01/18/21) Abboud, Leila
Bluebell Capital Partners, a London-based hedge fund founded by former Bulgari CEO Francesco Trapani, has acquired a stake in yogurt maker Danone (DANOY) and is urging the replacement of Chairman and CEO Emmanuel Faber due to "disappointing" share performance. Bluebell has not publicly revealed the size of its Danone share, whose disclosure is only mandatory if it passes the 5% threshold that triggers a filing to France's market regulator. Bluebell in mid-November submitted a letter calling on Danone's board to begin looking for a new CEO, and recommending the division of chairman and CEO roles. "The underperformance of Danone's share price has been driven, in our view, by a combination of poor operational record and questionable capital allocation choices," the fund stated in the letter. Bluebell further declared that Danone's total shareholder returns have trailed larger rivals Nestlé (NSRGY) and Unilever (UL) since Faber assumed the helm in October 2014. Danone's shares are up 2.7% since then, while Nestle's have increased 45% and Unilever's 72%. When queried about Bluebell's emergence, Danone said: "We value constructive dialogue with all our shareholders. The leadership team of Danone is highly focused on delivering long-term sustainable value." The company defended its "strong results" under Faber, citing its 3.1% average organic sales growth and 50% earnings per share growth from 2014 to 2019. The fund's arrival coincides with a problematic situation for Danone, with lockdowns depriving its bottled water business of its biggest profits at restaurants, bars, and convenience stores. Increasing costs of transport, raw materials, and logistics also have taken a bite. In response, Faber announced a major restructuring in October entailing up to 2,000 job cuts, and pledged to sell assets and trim the product portfolio. Some shareholders also doubt Faber's commitment to environmental and social goals, and are frustrated by Danone's inability to meet its financial targets. In June, investors voted for Danone to become a purpose-driven company to bring "health through food" to consumers. Danone's legal status requires it to not only generate profit for shareholders, but also do so in a way indicating that it will benefit its customers' health and the planet. "However, we feel that under the leadership of Mr. Faber, Danone did not manage to strike the right balance between shareholder value creation and sustainability," Bluebell said. The fund further noted how Unilever and Nestlé were also "extremely committed to sustainability" yet realized better shareholder returns. France has seen an increase in investor campaigns in recent years, mounted by hedge funds including Elliott Management and Amber Capital, taking aim at blue-chip companies previously thought to be untouchable. As a consequence, last year France's government mulled tighter controls on short sellers and activists, but ultimately implemented more modest measures, including a requirement for better disclosure.
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