Hasbro game maker.
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Hasbro goes on the offensive against an activist investor who wants to add new members to the company’s board and create the lucrative unit that includes Dungeons & Dragons.
On Wednesday, the toymaker released a letter to shareholders explaining why its current slate of board nominees should be elected and chastising proposed directors from Alta Fox Capital Management, which owns a 2.5% stake in the company. worth approximately $325 million.
“The candidates for Hasbro’s Board of Directors have the right balance of skills, experiences and new perspectives to guide our new CEO – Chris Cocks – and our management team in executing our long-term strategy for the benefit of all shareholders,” according to the shareholder letter, which was obtained by CNBC. “[Alta Fox] is attempting to replace three of our highly qualified and experienced directors with candidates who lack relevant industry expertise and, in our view, possess inferior skills.”
Representatives for Alta Fox did not immediately respond to CNBC’s request for comment.
The letter comes three weeks before Hasbro shareholders are set to intervene in a proxy battle between the toy company and the activist investor.
Alta Fox initially named five directors to the company’s board, but narrowed the slate to three in April. Activist investor wants to do away with Hasbro’s current ‘brand plan’ strategy and has suggested splitting the company’s Wizards of the Coast and digital gaming businesses as part of a wider campaign to increase profitability of the company’s consumer products and entertainment divisions.
Alta Fox told shareholders in February that the spinoff would increase Hasbro’s share value by $100. Hasbro has since refuted that claim and said separating Wizards of the Coast from its core business would be detrimental to both the division and the company as a whole.
“Candidates who lack relevant industry expertise”
In its letter Wednesday, Hasbro said it offered Alta Fox the opportunity to have its proposed directors interviewed by the board’s nominating committee. He said Alta Fox initially refused to do these interviews, but eventually allowed one of the contestants to speak with the committee.
Hasbro added that its board of directors had determined that Liz Hamren and Blake Jorgensen, whom Hasbro had nominated for director seats, were better additions to the board because of “their significant experience and expertise in games, technology, operations and capital allocation”.
“In our view, the Alta Fox nominees, given their limited relevant qualifications, would not contribute to the board of directors to help Hasbro achieve its long-term strategy,” the letter said.
Hasbro used its letter to point out the shortcomings it sees in each of Alta Fox’s three proposed directors.
The company said Marcelo Fischer, chief financial officer of IDT Telecom, “has a long history of underperforming spin-offs” and noted that his expertise is in telecommunications and personal care, which are “not relevant to Hasbro’s business model”.
Hasbro also noted that Fischer’s company, IDT, has a business relationship with Alta Fox that was not disclosed to shareholders.
The second director proposed by Alta Fox is Rani Hublou, who sits on the board of software company Tecsys. The toymaker said it asked to interview Hublou but Alta Fox was not given the opportunity. Hasbro said Hublou had experience “narrowly limited to marketing in the enterprise software space” and “no qualifications in consumer businesses focused on games, entertainment, or consumer products.”
He also noted that Tecsys’ total shareholder return has fallen 36% over the past 12 months.
The third proposed director is Carolyn Johnson, a board member of Kuvare Holdings, an insurance company. Hasbro said it was also not allowed to interview Johnson.
“[She] has a poor business transformation track record and lacks critical industry experience,” Hasbro wrote. “She has a short seven-month tenure and little success as Chief Transformation Officer at AIG, whose net income has declined 84% during her tenure.
Hasbro also said Johnson had no experience running or growing a consumer business and no expertise in games, consumer products or entertainment.
Where is Hasbro?
“It gets more and more personal the longer it persists,” said Stephanie Wissink, CEO of Jefferies. “Alta Fox’s most recent decision and Hasbro’s response are consistent with this view.”
“That’s what we don’t like most about activist campaigns against corporations; without open communication, mutual respect and agreement, people’s reputations are the remaining leverage in the proxy contest before the vote,” he said. she declared.
Hasbro’s strategy uses storytelling to drive toy sales. Under the leadership of the late CEO Brian Goldner, Hasbro has successfully expanded beyond toys and games and into the television, film and digital gaming space.
It uses toy brands like Transformers and My Little Pony to power movies and TV shows, and then that entertainment content to power toy sales. The company is currently producing a Dungeons & Dragons movie and TV show through eOne. He also used these marks for publishing, clothing and accessories.
While first-quarter results, which were released in April, were weaker than expected, Hasbro said rising prices and demand for toys will drive profits by the end of the year. Hasbro shares are down 11% since January.
Net revenue increased 4% to $1.16 billion, driven by demand for toys based on “Spider-Man: No Way Home” as well as role-playing games from the Magic: The Gathering franchises and Dungeons & Dragons.
The company also raised its forecast for operating profit growth for fiscal 2022 to mid-single digits from its earlier estimate of a low single-digit increase.