Activist investor Engine Capital urges board overhaul at life sciences firm Avantor

By Kamal Choudhury

Aug 11 (Reuters) - Activist investor Engine Capital has urged Avantor AVTR.N to refresh its board with new directors, undertake cost cutting initiatives and even consider selling itself, lifting the life sciences company's shares nearly 8% higher on Monday.

The move comes as Avantor's stock has slumped 45% this year, as the company faces weak demand from biotech and large pharma following the Trump administration's research funding cuts.

Engine, which owns about 3% stake in Avantor, highlighted the company's challenges over the last five years in its letter to the firm's board, including repeated forecast cuts and consistent underperformance versus investor expectations.

"We believe the board is responsible for Avantor's underperformance and has, in our opinion, failed to adequately oversee the company's operations, management, capital allocation and succession planning," Engine said.

Avantor, which supplies chemicals, lab products and services to research and biopharma customers, said its board is "actively engaged" in setting and executing strategy which is in the best interest of the company and its shareholders.

The company added it looks forward to an ongoing dialogue with all shareholders, including Engine Capital.

Engine Capital urged the company to consider a sale, estimating a potential transaction to value the company's shares between $17 and $19. Avantor's stock was trading at $12.41.

"It is worth recognizing that the life sciences industry is consolidating. Customers and suppliers are becoming bigger, and it may be beneficial for Avantor to ultimately be part of a larger entity," Engine Capital said.

A successful turnaround could lift Avantor's shares to $22 to $26 by the end of 2027, the activist investor added.

"An outright sale would require a buyer, and we don't see a natural buyer for the company at this time," said Bernstein analyst Eve Burstein after the Wall Street Journal first reported the development on Sunday.

Avantor last month named Emmanuel Ligner as its new CEO effective August 18, replacing Michael Stubblefield.