Dan Loeb’s Third Point builds stake in Colgate and sees value in pet food business in potential spin-off

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Dan Loeb’s Third Point has built up a sizable stake in the consumer giant Colgate-Palmoliveaccording to CNBC’s David Faber.

Loeb sees hidden value in Hill’s Pet Nutrition, a subsidiary of Colgate, a pet food company, if it were spun off.

The investor believes Hill’s could achieve even faster growth and better margins as a standalone company, and a valuation of nearly $20 billion on its 2023 earnings, Loeb will say in an upcoming investor letter, sources say.

Colgate has invested in its pet food business, its fastest-growing unit. Hill’s has always said it’s backed by “science”, which is considered a trend from a brand perspective.

The activist and hedge fund manager added that consolidation in the consumer health sector points to more opportunities for Colgate. Loeb said Colgate could become part of the current consumer health M&A minuet.

Colgate’s shares rose 1% on Tuesday. The stock is still down about 15% this year.