Company: Elanco Animal Health Inc. (ELAN)
Business: Elanco is an animal health company that develops, manufactures and markets products for companion and food animals. The company provides a range of parasiticide portfolios in the companion animal sector based on indications, species and formulations, with products that protect pets from worms, fleas and ticks. It also offers a pain and osteoarthritis portfolio across species, modes of action, indications and disease stages. It also provides treatments for otitis (ear infections), as well as cardiovascular and dermatology indications. Its portfolio in Food Animal Future Protein & Health category includes vaccines, nutritional enzymes and animal-only antibiotics. It also provides products in poultry and aquaculture production.
Stock Market Value: $14.4 billioin ($30.46 per share)
Activist: Sachem Head Capital
Percentage Ownership: 5.9%
Average Cost: $28.33
Activist Commentary: Sachem Head was founded in 2013 by Scott Ferguson, the first investment professional hired at Pershing Square where he worked for nine years. While Sachem Head has a history of solid value investing, their activism in their early years was short term and underwhelming at best. In their first campaign at Helen of Troy, they advocated for a sale of the company and share buybacks in a February 2014 letter and sold their entire position into the buyback a month later, something experienced activists never do. Their first 13D filing was on CDK Corp. only a month after the company went public through a spinoff – hardly giving management time to do anything. Since then, they have grown through campaigns at companies like Zoetis and Autodesk, partnering with more experienced investors like Pershing Square and Eminence. And recently, Ferguson has created value as a director of Olin, his first public company board seat in a portfolio company he did not invest in as part of a group. This investment in Elanco is his second of what we expect to be many in the future. Taking board seats signifies both commitment and contribution; and since their launch in 2013 Sachem Head has evolved from a value investor that used activism as a short-term stunt to a value investor that genuinely engages with companies to create value for shareholders.
