Nelson Peltz Looking to Make Changes at Estee Lauder, Driven by Boon with Disney

By:  Hadassa Kalatizadeh

Billionaire Nelson Peltz, an activist investor, may have his eye set on changing things up at Estée Lauder.

The NY Post reported that sources say Peltz is looking to make changes at the cosmetics giant, including possibly ousting CEO Fabrizio Freda and possibly shaking things up for an eventual sale of the company.  “A number of directors and institutional investors think the CEO has lost his touch,” a source told the Post. “They are now recruiting shareholder activists.”  Peltz declined a request for comment made by The Post on Sunday.  It’s not yet known when or if Peltzacquired shares of Estée Lauder, but insiders say Peltz seems to be setting in motion a shareholder campaign to change the company’s leadership.

Last week, Estée Lauder released a weak earnings report, which led to the company’s stock price to tumble 17% last Wednesday.  Speculation began that the New York- based cosmetics company could be Peltz’s next activist project, per sources for the Post. By Friday afternoon, share prices of Estee Lauder slightly rebounded to close to $203.54, which is still way off the trading high of $280 reached on Feb. 1.

Peltz, the Brooklyn born businessman and investor co-founded investment firm Trian Fund Management in 2005.  Trian now boasts $8.5 billion in assets under management. Mr. Peltz has an estimated net worth of $1.5 billion, as per Forbes’ 2023 report.  The 80-year-old is also chairman of Wendy’s Company, Sysco, and The Madison Square Garden Company.   He formerly served as director of H.J. Heinz Company, and Mondelēz International.  He was also a former CEO of Triangle Industries.

Mr. Peltz was recently in the news for shaking things up at Disney Co in a proxy fight—by pushing CEO Bob Iger to substantially cut costs, and layoff some 7,000 employees. Peltz had undertaken the overhaul after buying some $1 billion in Disney stocks, and ended up making a 17% paper profit on his shares after his changes were implemented.

Estée Lauder could be worth some $72 billion if sold, and this may be Peltz’s ultimate goal.  Before the pandemic, in 2020, Bernard Arnault, the richest person in the world and head of French luxury conglomerate LVMH had mentioned to the Lauder family, that his company may be interested in purchasing Estée Lauder, should it ever be for sale, as per two Post sources in the know.  “Buying Estée would give Arnault the biggest competitor to L’Oreal — and he hates L’Oreal,” a source close to the situation said.  The founding Estée Lauder family, still controls the stock, and would need to approve any sale. Chairman emeritus Leonard Lauder, who is 90 years old, is still active in the business, and is thought to be against a sale of the company which his mother built.

For now, while a sale may be off limits, Peltz would still have a good chance at making other changes at the company.  Only four of the 16 board members at Estee Lauder are Lauder family members, and so a majority of directors could decide to replace the CEO with an executive who could cut costs, work out new marketing strategies and make way for new brands, reviving the company, as per sources for the Post.  These changes could pave the way for a sale at a later time.