By Svea Herbst-Bayliss
NEW YORK (Reuters) – Activist investor Ananym Capital Management plans to nominate as many as half a dozen directors to the board at Henry Schein (NASDAQ:), 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 and Benco, instead of benchmarking its operational efficiency against the largest U.S. healthcare distribution companies like Cardinal Health (NYSE:), Cencora, and McKesson (NYSE:).
Penner, a former partner at activist Jana Partners, successfully challenged Exxon Mobil (NYSE:)’s board in 2021 at upstart investor Engine No. 1. Silver was a founding partner at P2 Capital Partners (WA:).
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