'Poison pill' to be dropped at Nestlé

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Confectionery giant Nestlé is taking its first step towards dropping a controversial "poison pill" that protects it from takeover.

Nestlé introduced the articles of association in 1989, when overseas investors were allowed to buy shares in the Swiss group for the first time. Management were concerned that predatory shareholders could buy up stock and make a play for the group without it realising.

The articles prevent any investor from having voting rights on more than 3 per cent of the stock, as well as requiring approval for key decisions from 75 per cent of shareholders.

But the poison pill is now seen as outdated and shareholder groups have expressed concern about its continued existence.

Nestlé's chief executive, Peter Brabeck-Letmathe, canvassed the opinion of investors last year and, at the annual general meeting on 6 April, they will be asked to give a mandate for revising the articles. Should they do so, the board is then expected to make the relevant changes.

A Nestlé spokesman said the matter was being handled this way because it only expected around 60 per cent of investors to vote.

Jean-Nicolas Caprasse, the managing director of Institution Investor Services Europe, welcomed the initiative: "While there are a number of risks involved with the current proposal, it seems to be a move in the right direction and shows that Nestlé and its board are taking steps to address shareholder concerns raised over the last year."

However, Nestlé won't be splitting the roles of chairman and chief executive, contrary to best corporate governance practice. Mr Brabeck-Letmathe was recently made chairman, but the spokesman said: "[The board] is free to decide how it wants to structure itself, how it wants to do this and that, and we have no intention of changing that."

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