Starboard Value LP an active investor has acquired a significant equity position in Elanco Animal Health (ELAN) has nominated three directors to the 13-person board. In December, Sachem Head Capital Management that holds six percent of ELAN equity placed founder Scott Ferguson on the Board. Shortly thereafter, the company eliminated 350 positions and reduced R&D spending in an attempt to increase shareholder value. Starboard has a reputation of aggressively restructuring and forcing management to take steps to increase share price. Over the past 52 weeks ELAN has traded in a range of $15.17 to $34.09 with a 50-day moving average of $30.42.
Elanco has a market capitalization of $14.8 billion with 94.7 percent of equity held by institutions. Approximately 2.4 percent of float is short effective February 12th. Elanco has attained a 12-month trailing operating margin of 0.4 percent and a profit margin of -17.1 percent. Return on assets is less than 0.1 percent and the return on equity is -8.0 percent. Elanco carries approximately $6.2 billion in total debt increased by the acquisition of Bayer Animal Health. ELAN posts total assets of $17.69 billion, effective December 31st 2020 with $12.61 billion of this amount represented by goodwill and intangibles.
Elanco faces litigation based on the fact that a one-time subsidiary Agristats Inc. is a co-defendant in a class-action lawsuit alleging collusion among major broiler producers. A number of the defendants have already settled with plaintiffs and it is highly likely that Elanco that owned Agristats for the period subject to litigation will be liable for substantial settlement costs and legal fees or alternatively will bear costs in the event of an adverse judgment if the case goes to trial.
Following the news of the Starboard move, ELAN spiked from $30.84 at 13H30 on March 3rd to $32.95 but declined thereafter settling to $31.31 at close of trading.