Activist Hedge Fund Targets Henry Schein with Board Challenge

Key Points:

* Ananym Capital Management plans to nominate up to six directors to Henry Schein's board.
* The fund seeks a new CEO, cost reductions, and optimized capital allocation.
* Henry Schein has 13 board members, with five serving over 12 years.
* Ananym owns 471,000 shares in Henry Schein, its largest position.
* The hedge fund argues for succession planning, better acquisition integration, and capital reallocation.
* Henry Schein's stock has risen 10% since Ananym's involvement was reported.

Overview:

Hedge fund Ananym Capital Management is preparing to nominate up to half a dozen directors to the board of dental and medical distributor Henry Schein. The fund believes the company needs to search for a new CEO, reduce expenses, and optimize its capital allocation.

Henry Schein has a market capitalization of $9.3 billion and has 13 board members, including Chairman and CEO Stanley Bergman, who has served for over four decades. Five directors have been on the board for a dozen years or more.

Ananym's initiative follows informal talks between the company and the hedge fund late last year. The fund is concerned that substantive discussions have not taken place since.

The proxy fight, if initiated, would be one of the first of the new year. Bankers and lawyers anticipate more companies facing shareholder battles in 2025.

However, Ananym could withdraw its board challenge if Henry Schein makes certain concessions or announces further plans.

Concerns and Demands:

Ananym contends that Henry Schein needs new board members to address CEO succession and other issues. The fund has expressed concerns about departures of senior executives, suggesting a lack of future opportunities within the company.

The hedge fund also argues that Henry Schein's spending is uncontrolled and that it needs to integrate acquisitions more effectively. It recommends reallocating capital toward stock repurchases and away from mergers and acquisitions until prior deals are integrated.

Background:

Ananym was founded in September 2022 by veteran investors Charlie Penner and Alex Silver. Penner successfully challenged Exxon Mobil's board in 2021 as part of activist investor Engine No. 1. Silver is a former founding partner at P2 Capital Partners.

Henry Schein's stock has increased roughly 10% since Ananym's involvement was reported in November 2022. However, investors have raised concerns about the company's complacency and lack of benchmarking against larger healthcare distribution firms.