Activist investor Ananym Capital pushes for changes at Henry Schein, sources say

Henry Schein

18/11/2024 18:30

* 
      Ananym Capital urges board changes, CEO succession plan,
cost
cuts
    

        * 
      Ananym says medical distribution business sale could
increase
stock price by 20%
    

        * 
      Ananym has recruited potential board directors, sources
say
    

  
    By Svea Herbst-Bayliss
       NEW YORK, Nov 18 (Reuters) - Activist investor Ananym
Capital Management is urging healthcare products distributor
Henry Schein  HSIC.O  to refresh its board, cut costs, tackle
succession planning and consider selling its medical
distribution business, sources close to matter said on Monday.
    A sale of the medical distribution business could help drive
up the share price by roughly 20% while earnings per share could
jump by some 35% if spending were curtailed, Ananym has told
Schein executives, according to the sources.
    Ananym, a newly launched firm run by veteran investors
Charlie Penner and Alex Silver, argues that Schein needs new
board members and ultimately a new chief executive to tackle    
spending that has spiraled out of control, integrate recent
acquisitions and nurture and hold onto new talent, the sources
said.
    The new firm is concerned that Schein, currently valued at
$9 billion, is complacent and satisfied to outperform only its
direct dental distribution peers Patterson  PDCO.O  and Benco
instead of competing with the largest U.S. healthcare
distribution companies like Cardinal Health  CAH.N , Cencora
 COR.N , and McKesson  MCK.N .
    Ananym has held informal talks with the company but is now
stepping up the pressure with calls for new directors, a plan to
replace CEO Stanley Bergman, who has been in the position for 35
years, and tackle other strategic priorities, the sources said.
    A representative for the company did not immediately respond
to a request for comment.
    The two Ananym partners have prominent resumes in the
activist world. Penner, successfully challenged Exxon Mobil's
 XOM.N  board in 2021 at upstart investor Engine No. 1 and
previously was a partner at activist Jana Partners. Silver was a
founding partner at P2 Capital Partners.
    The new firm, which has some $250 million in capital and
began putting money to work in September, is focused on
constructive, value-enhancing engagements with mid-sized public
companies.
    Ananym has told Schein that it has recruited qualified
director candidates who could replace some of the company's 13
board members who have served too long and lack relevant
industry experience, the sources said.
    After Schein spent more than $4 billion on acquisitions in
the last five years, Ananym wants it to focus on integration of
newer assets rather than on additional purchases. 
    Shareholders who have been frustrated by the company's
decisions would gain confidence in its leadership if M&A
activities were curtailed and the company were to buy back
stock, Ananym has argued, the sources said. 
    The new investment firm is pushing Schein to consider
selling the medical distribution business where it says it is
quickly becoming tougher to compete and the company is not
positioned to generate long-term, sustainable free cash flows. 
    That business could be valued at $2.5 billion or more in a
sale, Ananym has argued, according to the sources. The company
could use proceeds to repurchase its undervalued shares, the
sources said.
    

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