Activist Ananym plans to launch agency

Henry Schein CEO has been on the job for decades, investors urge succession plan

Investors worry potential CEO candidates don’t see future with company

Possible Ananym director candidates have healthcare distribution, business transformation experience

NEW YORK, Jan 22 (Reuters) – Activist investor Ananym Capital Management plans to nominate as many as six directors to Henry Schein’s board, arguing the dental and medical distributor needs to begin a search for a new CEO, cut costs and optimize, three people familiar with the matter said. , capital allocation.

The hedge fund, launched in September by veteran investors Charlie Penner and Alex Silver, may announce its slate in the coming weeks, picking executives experienced in healthcare distribution and business transformation, sources said.

Henry Schein is valued at $9.3 billion and has 13 board members, including Chairman and CEO Stanley Bergman, 75, who has been a director for more than 40 years. Five directors have served on the board for a decade or more.

A sweeping board challenge will add to pressure on the company after Henry Schein held informal talks with hedge funds late last year. Ananim remains concerned that more substantive discussions have not yet taken place.

Representatives for Henry Schein did not immediately respond to a request for comment.

The company has previously said it has regular conversations with investors to enhance shareholder value and analyze their investments in this effort.

The proxy fight will be the first of the new year. By 2025, more companies are likely to face costly battles with shareholders over hot-button issues ranging from CEO succession to sales, bankers and lawyers say.

However, Ananym may also drop the board challenge, subject to some kind of agreement or further statements from Henry Schein, sources said.

Penner and Silver believed Henry Schein needed new blood on the board to immediately consider Bergman’s succession plan. Ananym owns 471,000 shares of Henry Schein, the largest position in the fund, which has $250 million under management.

Investors worry that little planning has been done for what happens after Bergman leaves.

Several Henry Schein executives have departed after just a few years on the job, including former Henry Schein Global Dental Group CEO Jonathan Koch and former U.S. Dental Division president AJ Caffentzis.

The departures have raised concerns that executives who could be potential CEO candidates don’t see themselves having a future at the company.

The hedge fund also believes spending is out of control and Henry Schein needs to better integrate acquisitions, people familiar with the matter said.

Ananym said Henry Schein should also reallocate capital spending to buy back its undervalued stock and stay away from mergers and acquisitions until previous deals are integrated.

The company’s shares have risen about 10% since Reuters first reported Ananym’s involvement in November. It closed Wednesday at $74.78, essentially unchanged over the past 52 weeks.

Investors worry that Henry Schein is getting complacent and is content simply to outperform its direct dental distribution peers Patterson and Benco, rather than comparing its operational efficiency to the largest U.S. medical distribution companies such as Cardinal Health, Cencora and McKesson.

Penner, a former partner at activist Jana Partners, successfully challenged the Exxon Mobil board in 2021 as an upstart investor in Engine No. 1. Silver is a founding partner of P2 Capital Partners.

(Reporting by Svea Herbst-Bayliss; Editing by Richard Chang)