Ancora Holdings Group LLC, a 3% shareholder in Elanco Animal Health, is calling for leadership change after what it calls years of “anemic margins, ballooning debt, poor capital allocation and shoddy forecasting.”
Ancora, one of Elanco’s largest investors, nominated four candidates for election to Elanco’s 12-person board of directors and has proposed an “orderly succession process” for CEO Jeff Simmons. Simmons is among four Elanco directors who will stand for election this year.
“Ancora has amassed a roughly US$250 million stake in Elanco because we believe it is a high-potential business with an admirable mission, strong market opportunity and significant runway for sustained value creation,” Ancora said in a press release sent to Feed Strategy. “Based on extensive analysis and good faith engagement with Elanco, it appears that the biggest barriers to success are the company’s insular board and unaccountable CEO.”
Ancora said it provided Elanco with a detailed analysis of its issues pertaining to corporate governance, finance, operations and product development, but said the board “refused to engage in substantive principal-to-principal negotiations and a real two-way discussion regarding changes that would benefit the company.”
Furthermore, Ancora said Elanco’s stock is down 50% since its acquisition of Bayer Animal Health in 2020 and that the company for years has said it was “at an inflection point” for value creation.
Ancora’s nominees for director candidates are:
- James Chadwick, a major Elanco shareholder and seasoned investor
- Andrew Clarke, former CFO of C.H. Robinson Worldwide Inc. and Forward Air Corp.
- Kathy Turner, former global chief marketing officer of IDEXX Laboratories
- Craig Wallace, former Ceva Santé Animale CEO
“We have identified areas in which prior campaigns for change at the company may have fallen short,” Ancora said. “Our slate possesses sorely needed experience in capital allocation, corporate governance, pet health care, supply chain management and succession planning. Each of our director candidates looks forward to engaging with Elanco shareholders about their constructive and practical ideas for igniting a turnaround at the company and identifying its next generation of management. If elected by shareholders, rest assured our nominees intend to put this contest in the rearview mirror and support the type of collegial boardroom dialogue that is necessary to unlocking the full potential of Elanco.”
In a statement on its website, Elanco defended its strategy.
"The execution of Elanco’s innovation, portfolio and productivity strategy, led by CEO Jeff Simmons, is working," it said. "Elanco has returned to growth and is progressing a robust and innovative pipeline that will generate further growth. Elanco’s commitment to the continued development of a strong and sustainable innovation pipeline is a multi-year process which is key to the company’s future success.
"Importantly, shareholders have been rewarded. Elanco stock is up 39% over the past year, reaching a 52-week high earlier this week and significantly outperforming its peers."
The company said it welcomes engagement with shareholders and suggestions for improvements. However, it added: "Since revealing its candidates in writing two weeks ago, Ancora has refused to allow the Elanco board to meet those candidates. Instead, Ancora has demanded that the board agree to add three of Ancora’s candidates, sight unseen, to the Elanco board and to significantly overhaul the leadership of the board and the company. Our interest in meeting with their candidates still stands."
The company announced its financial results for the fourth quarter and full year 2023 this week. Its revenue was up 5% in the fourth quarter of 2023 to US$1.04 billion, compared with the same period a year earlier. For the full year, Elanco reported revenue of US$4.42 billion, up slightly from US4.41 billion for 2022.
Also this week, Elanco announced it would cut 420 jobs in a restructuring that will shift resources from its farm animal to pet health units.
In February, Elanco said it had entered into an agreement to sell its aqua business to Merck Animal Health for approximately US$1.3 billion in cash, which represents approximately 7.4 times the estimated 2023 revenue of the Elanco aqua business.
