Hasbro slams activist investor’s proposed board directors amid proxy battle
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Hasbro is a game maker.
Justin Sullivan | Getty Images
HasbroAre you going on the offensive to an activist investor? wants to add new members to the company’s board and spin off the lucrative unit that includes Dungeons & Dragons.
Wednesday’s letter from the toymaker to shareholders outlined why it currently has a slate of candidates for its board and warned Alta Fox Capital Management about the proposed directors. Alta Fox Capital Management owns approximately 2.5% of the company.
“The Hasbro board nominees have the right balance of skill sets, experiences and fresh 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 letter to shareholders, which was obtained by CNBC. “[Alta Fox]Three of our experienced and highly-skilled directors are being replaced by nominees with less industry knowledge and who, according to us, have inferior skill sets.
CNBC did not receive a response from Alta Fox’s representatives immediately.
This letter arrives three weeks ahead of Hasbro shareholders who will weigh in on the proxy fight between Hasbro and the activist investor.
Alta Fox had initially appointed five directors to the board of the company, but she reduced the number to three in April. Alta Fox, an activist investor, wants Hasbro to abandon its current brand blueprint strategy. He suggested that the Wizards of the Coast business and the digital gaming business be spun off as part of a larger push to increase profitability within the entertainment and consumer product divisions.
Alta Fox informed shareholders in February that Hasbro’s share would rise by $100 due to the spinoff. Hasbro, however, has denied that claim. They stated that the decision to separate Wizards of the Coast (and the whole company) would have a negative impact on both the business and the division.
“Nominees without relevant industry experience”
Hasbro stated in a Wednesday letter that Alta Fox was offered the chance to interview the nominating board committee. Although Alta Fox was initially reluctant to take part in the interviews, Hasbro eventually permitted one of its nominees to meet with the committee.
Hasbro stated that Blake Jorgensen and Liz Hamren, who had been proposed by Hasbro for the director positions, were more suitable additions because of their “significant experience and expertise” in technology, gaming, capital allocation, and operations.
According to the letter, “Alta Fox’s nominees would, in our opinion,” not add value to Hasbro’s board, given their minimal relevant qualifications.”
Hasbro wrote to highlight the flaws it saw in the proposed Alta Fox directors.
Marcelo Fischer was the chief financial officer of IDT Telecom. He has “a long history” of poorly performing spin-offs. Hasbro also noted that his experience is not in telecommunications or personal care.
Hasbro pointed out that Fischer’s IDT company has an unreported business relationship to Alta Fox.
Rani Hublou is Alta Fox’s second director proposal. She sits on the board at Tecsys, a software company. According to the toymaker, it requested to interview Hublou. However, Alta Fox refused to allow them to. Hasbro claimed that Hublou is only qualified to market in enterprise software and has no experience in gaming or entertainment businesses.
It was also reported that Tecsys shareholder returns have fallen 36% during the past twelve months.
Carolyn Johnson is the third director proposed. She’s a Kuvare Holdings board member and an insurance company. Hasbro also stated it wasn’t allowed to interview Johnson.
“[She]Hasbro noted that Hasbro had poor business and industry knowledge. She was a seven month tenured chief transformation officer for AIG. Her net income dropped 84% over her tenure.
Hasbro said Johnson also had no experience in leading or growing consumer businesses and did not possess expertise in games, entertainment products or gaming.
Hasbro where you stand
Stephanie Wissink (managing director of Jefferies) stated that “this is becoming more personal as it continues to persist.” “Alta Fox has made a recent move. Hasbro has responded in line with that opinion.”
She said, “It is what we hate most about activist campaigns against corporate campaigns; people’s reputations, without open communication and mutual respect, are the only leverage in proxy contests heading into the election.”
Hasbro uses storytelling to increase toys sales. Brian Goldner was the CEO of Hasbro. He helped the company grow beyond toys and games into television and movies, and the digital gaming market.
Toy companies like Transformers or My Little Pony are used to produce movies and TV shows. The entertainment content is then used to drive sales of toys. The company is currently producing a Dungeons & Dragons movie and television show through eOne. The company has used the brands to publish, produce apparel, and accessory.
While first quarter results, which were reported in April, were weaker-than-expected, Hasbro said that higher toy prices and demand will deliver profits by the end of the year. Hasbro’s shares have fallen 11% in the past year.
Net revenue rose 4% to $1.16 billion, boosted by demand for toys based on “Spider-Man: No Way Home” as well as for role-playing games from franchises Magic: The Gathering and Dungeons & Dragons.
From its previous estimate of a rise in the low single digits, the company has now raised its forecast for fiscal 2022 operating profits growth to mid-single figures.
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