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

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.


Oil prices surge after attacks hit Saudi output

Updated 16 September 2019

Oil prices surge after attacks hit Saudi output

  • The Houthi attacks hit two Aramco sites and effectively shut down six percent of the global oil supply
  • President Donald Trump said Sunday the US was ‘locked and loaded’ to respond to the attacks

HONG KONG: Oil prices saw a record surge Monday after attacks on two Saudi facilities slashed output in the world’s top producer by half, fueling fresh geopolitical fears as Donald Trump blamed Iran and raised the possibility of a military strike on the country.
Brent futures surged $12 in the first few minutes of business — the most in dollar terms since they were launched in 1988 and representing a jump of nearly 20 percent — while WTI jumped more than $8, or 15 percent.
Both contracts pared the gains but were both still more than 10 percent up.
The attack by Tehran-backed Houthi militia in neighboring Yemen, where a Saudi-led coalition is bogged down in a five-year war, hit two sites owned by state-run giant Aramco and effectively shut down six percent of the global oil supply.
Trump said Sunday the US was “locked and loaded” to respond to the attack, while Secretary of State Mike Pompeo said: “The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression.”
Tehran denies the accusations but the news revived fears of a conflict in the tinderbox Middle East after a series of attacks on oil tankers earlier this year that were also blamed on Iran.
“Tensions in the Middle East are rising quickly, meaning this story will continue to reverberate this week even after the knee-jerk panic in oil markets this morning,” said Jeffrey Halley, senior market analyst at OANDA.
Trump authorized the release of US supplies from its Strategic Petroleum Reserve, while Aramco said more than half of the five million barrels of production lost will be restored by tomorrow.
But the strikes raise concerns about the security of supplies from the world’s biggest producer.
Oil prices had dropped last week after news that Trump had fired his anti-Iran hawkish national security adviser John Bolton, which was seen as paving the way for an easing of tensions in the region.
“One thing we can say with confidence is that if part of the reason for last week’s fall in oil and improvement in geopolitical risk sentiment was the news of John Bolton’s sacking ... and thoughts this was a precursor to some form of rapprochement between Trump and Iran, then it is no longer valid,” said Ray Attrill at National Australia Bank.