Abu Dhabi in talks for Nestle business

A logo is pictured during the 152nd Annual General Meeting of Nestle in Lausanne, Switzerland April 11, 2019. (Reuters/File Photo)
Updated 17 May 2019
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Abu Dhabi in talks for Nestle business

ZURICH/FRANKFURT: Nestle has entered exclusive talks to sell its skin health business to a consortium led by EQT Partners for 10.2 billion Swiss francs ($10.1 billion), as the food group shifts its portfolio in response to changing consumer demands.
The proposed transaction with private equity firm EQT, a unit of the Abu Dhabi Investment Authority and PSP Investments, is expected to close in the second half of 2019 pending regulatory approval, Nestle said on Thursday.
Nestle Chief Executive Mark Schneider put the unit up for sale last September as the group moved to ditch underperforming businesses, following years of slowing growth as consumers favored fresh foods over packaged goods.
Nestle was also under fire from activist investor Daniel Loeb’s Third Point, which asked for a faster overhaul in July. The US hedge fund has since generated very good returns on its Nestle stake, leading Loeb to praise Schneider’s performance this year.
Nestle shares were up 0.8 percent at 1:15 p.m. GMT on Thursday, after hitting an all-time high earlier in the session following the announcement of the deal, which according to Refinitiv data is the second largest European private equity buyout since the financial crisis after Carlyle’s acquisition of an Akzo Nobel unit last year.
Analysts said the price tag was attractive for Nestle at an enterprise value-to-sales multiple of 3.6 times, or a multiple of roughly 20 times expected core earnings.
The unit, which will be rebranded Galderma, is expected to post earnings before interest, tax, depreciation and amortization of 550 million Swiss francs this year and of more than 600 million next year, a person close to the matter said.
“EQT focuses on quality businesses. We have a lot of good ideas (about) how to develop Nestle Skin Health into a pearl and then make our return,” EQT partner and co-head of private equity Marcus Brennecke told Reuters. “We will strengthen Galderma’s board with relevant industrial expertise to develop each of the three business units to their full potential. A couple of prescription drugs are theoretical blockbusters with large business opportunities,” he said.
ZKB analyst Patrik Schwendimann estimated the transaction would generate an extraordinary gain before taxes of around 4 billion francs for Nestle based on the net book value of 6.2 billion francs Nestle gave the unit in its 2018 financial statements.
Nestle will provide an update on how it will use the proceeds and its future capital structure after the deal closes. Schwendimann said Nestle was under no pressure to announce a new share buyback given that the current one runs until the end of the year.


Lufthansa announces overhaul of budget carrier Eurowings

Updated 24 June 2019
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Lufthansa announces overhaul of budget carrier Eurowings

  • Lufthansa cited falling revenues at Eurowings as a major reason for its warning on full-year profits on June 16
  • Eurowings’ long-haul business would be managed by Lufthansa in the future

BERLIN: Lufthansa on Monday announced a turnaround plan for Eurowings in which the budget carrier will focus on short-haul flights and seek a 15 percent cut in costs by 2022 in the hope of returning to profit.
The German airline cited falling revenues at Eurowings as a major reason for its warning on full-year profits on June 16. Eurowings’ revenue was also forecast to fall sharply in the second quarter.
Lufthansa said its Eurowings fleet would be standardized on the Airbus A320 family and it would seek to boost productivity at Eurowings by limiting itself in Germany to one air operator’s certificate.
Brussels Airlines — the Belgian national flag carrier which Lufthansa took control of in 2016 — would not be integrated into Eurowings, Lufthansa said. A turnaround plan for Brussels Airlines will be announced in the third quarter.
Lufthansa also said it would start pegging its dividend payout ratio to net profit in the future to give the group more flexibility. It would pay out a regular dividend of 20 percent-40 percent of net profit, adjusted for one-off gains and losses.
Lufthansa said Eurowings’ long-haul business would be managed by Lufthansa in the future.
Carsten Spohr, Chief Executive Officer of Lufthansa, said Monday’s announcements sent “a clear signal that this company cares about its shareholders and tries to create value for them.”
Lufthansa said its Network Airlines — made up of Lufthansa, Swiss and Austrian Airlines — would aim to use innovations in sales and distribution to make a contribution to increasing unit revenues by 3 percent by 2022.
Network Airlines will aim to reduce unit costs continuously by 1 to 2 percent annually, the airline said.