Activist Ananym plans to launch proxy fight at Henry Schein, sources say

Henry Schein

22/01/2025 21:25

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      Henry Schein CEO has served for decades, investors urge
succession planning    
    

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      Investors worry potential CEO candidates see little future
at
company     
    

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      Possible Ananym director candidates have healthcare
distribution, business transformation experience  
    

  
    By Svea Herbst-Bayliss
       NEW YORK, Jan 22 (Reuters) - Activist investor Ananym
Capital Management plans to nominate as many as half a dozen
directors to the board at Henry Schein  HSIC.O , arguing the
dental and medical distributor needs to start searching for a
new CEO, cut costs and optimize capital allocation, three
sources familiar with the matter said.
    The hedge fund, launched in September by veteran investors
Charlie Penner and Alex Silver, could announce its slate within
the next weeks, picking executives experienced in healthcare
distribution and business transformation, the sources said.
    Henry Schein, valued at $9.3 billion, has 13 board members,
including Chairman and Chief Executive Stanley Bergman, 75, who
has served as a director for more than four decades. Five
directors have been on the board for a dozen years or more.
    A full-blown board challenge would dial up the pressure on
Henry Schein after the company and hedge fund held informal
talks late last year. Ananym remains concerned that more
substantive discussions have not taken place.
    A representative for Henry Schein did not immediately
respond to a request for comment.
        The company has previously said that it regularly
engages in dialogue with investors to enhance shareholder value
and analyzes their input in that context.
    The proxy fight would be among the first of the new year.
Bankers and lawyers say more companies could face costly battles
with shareholders in 2025 over hot button issues ranging from
CEO succession to putting themselves up for sale.
    However, Ananym could also back off from a board challenge,
subject to some sort of agreement or further announcements from
Henry Schein, the sources said.
    Penner and Silver have argued that Henry Schein needs fresh
blood on the board to immediately consider succession planning
for Bergman. Ananym owns 471,000 shares in Henry Schein and the
position is the biggest for the fund, which oversees $250
million.
    Investors fret that little planning has been devoted to what
happens after Bergman leaves.
    Several Henry Schein senior executives exited after only a
few years on the job, including Jonathan Koch, former CEO of
Henry Schein's Global Dental Group, and A.J. Caffentzis, former
president of its U.S. dental division.
    The departures raised concerns that top executives who might
have been potential CEO candidates see no future for themselves
at the company.
    The hedge fund also argued that spending has spiraled out of
control and that Henry Schein needs to better integrate
acquisitions, the people said.
    Henry Schein should also reallocate capital spending toward
repurchasing its undervalued stock and away from mergers and
acquisitions until prior deals are integrated, Ananym has said.
    The stock price has climbed roughly 10% since Ananym's
involvement was first reported in November by Reuters. It closed
at $74.78 on Wednesday, after trading largely flat over the last
52 weeks.
    Investors have expressed concern that Henry Schein is
complacent and satisfied to outperform only its direct dental
distribution peers Patterson  PDCO.O  and Benco, instead of
benchmarking its operational efficiency against the largest U.S.
healthcare distribution companies like Cardinal Health  CAH.N ,
Cencora  COR.N , and McKesson  MCK.N .
    Penner, a former partner at activist Jana Partners,
successfully challenged Exxon Mobil's  XOM.N  board in 2021 at
upstart investor Engine No. 1. Silver was a founding partner at
P2 Capital Partners.
    

 (Reporting by Svea Herbst-Bayliss; Editing by Richard Chang)
 ((svea.herbst@thomsonreuters.com; +617 233 2138; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))