Nestle to examine "strategic options" for skin health unit

"Nestle Skin Health has made significant progress under its new leadership team over the past two years", said chief exec Mark Schneider.

Nestle SA opened a strategic review of its skin-health unit amid pressure from activist investor Dan Loeb to focus on its main food and beverage and nutrition businesses.

Nestle said on Thursday it was exploring strategic options for its skin health business, saying it believes the unit - once seen as a rising star - might be better off outside of the Swiss food maker. The unit, with sales of about 2.7 billion Swiss francs ($2.8 billion) previous year, has been a weak spot for the company due to generic competition, and is cutting hundreds of jobs and closing sites.

"One of the CEO's top priorities at the beginning of his mandate was to stop the hemorrhaging, which had been tolerated for some time", Jean-Philippe Bertschy, an analyst at Bank Vontobel AG, wrote in a note. A sale could fetch as much as 8 billion francs, estimates Alain Oberhuber, an analyst at MainFirst. Another analyst put the sale value at about 7 billion francs.

"Sharpening our strategic focus on Nestle's core food, beverage and nutritional health products offers the best opportunity for long-term profitable growth and is fully in line with the pursuit of our company's goal", said Paul Bulcke, chairman, Nestle.

Following a strategic review earlier this year, Nestle's board chose to increase the company's focus on food, drinks and nutritional health products.

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Food giant Nestle today announced plans to sell or spin off its skin health business, prompting speculation the company could get rid of its €26bn stake in L'Oréal. Last year, Nestle started restructuring the business, cutting jobs and closing a factory.

Divesting the business represents a symbolic break with the decisions of Schneider's predecessors, Jefferies' Deboo said. "The board has therefore made a decision to explore strategic options for Nestle Skin Health".

Nestle has also sold its USA confectionery unit, and has done several deals in coffee, involving Starbucks (SBUX.O) and Blue Bottle.

The skin health review is due to be completed by mid-2019.

Nestle shares were roughly flat at 0730 GMT. This week the company agreed to sell Gerber Life Insurance to Western & Southern Financial Group for US$1.55 billion as it considers such financial products outside its main business.

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