Daniel Loeb's Third Point has built a significant position in toothpaste maker Colgate-Palmolive and sees value in a potential spinoff of its Hill's Pet Nutrition business, the activist investor said in a letter seen by Reuters.
The investor letter did not disclose the size of Third Point's stake, but cited several reasons for investing in the consumer goods company, including its pricing power in inflationary conditions and the strength in its pet food business.
"There is meaningful hidden value in the company's Hill's Pet Nutrition business, which we believe would command a premium multiple if separated from Colgate's consumer assets," the letter said.
Sales in Colgate's pet nutrition business have outpaced overall company revenue over the last few years as consumers pay more attention to the needs of their cats and dogs.
Pet adoption also jumped during the pandemic.
The company did not respond to Reuters' request for comment.
Shares of Colgate rose 3.6% in morning trading, after CNBC first reported the news.