Shareholder Vote To Decide Enzo’s Fate

The activist hedge fund manager Harbert Management Corp. (Birmingham, AL) is seeking to replace two board members at Enzo Biochem (New York City) with its own nominees. A shareholder vote at Enzo’s annual meeting on January 31 will decide the matter. Harbert has an
11.8% stake in Enzo making it the company’s largest shareholder. Harbert acquired its stake in Enzo from May to August 2019 at prices ranging from $3.07 to $3.65 per share.

Enzo’s board has five members and is led by Elazar Rabbini, PhD, age 76, an original founder who has served as the company’s Chairman and CEO since its inception in 1976. Harbert wants to replace board members Barry Weiner, 69, who is President of Enzo, and Bruce Hanna, PhD, 76, an independent director who is Clinical Professor of Pathology and Clinical Professor of Microbiology at the New York University School of Medicine. Rabbini owns a 4% stake in Enzo, while Weiner has a 2.8% stake.

Harbert’s two nominees are Fabian Blank, 45, who is former CEO of Meduna Klinik Group in Germany and a former McKinsey consultant, and Peter Clemens, 54, who has held CFO positions at Caremark Rx and Surgical Care Affiliates. If both are elected, Harbert would control 40% of Enzo’s board.
Harbert says that Enzo’s stock has underperformed for years as a result of a bloated cost structure and poor strategy. Harbert wants Enzo to: 1) sell its drug development business and non-core patents; 2) relocate its headquarters from Madison Avenue to its laboratory in Long Island; and 3) focus its clinical lab business on the greater New York City market. Harbert has created a website (CureEnzo.com) to convince Enzo shareholders to vote for its two board nominees.

Meanwhile, Enzo management has countered that Harbert’s board nominees: 1) have irrelevant experience; 2) declined an opportunity to participate in a standard interview process; and 3) are likely to promote Harbert’s short-term objective of driving a fire sale of Enzo’s assets at depressed valuations.