By Svea Herbst-Bayliss

(Reuters) – Hasbro Inc (NASDAQ:). Alta Fox Capital Management LLC offered a settlement to allow only one nominee to be added to the U.S.-toymaker’s board. This would have made it more likely that shareholders could vote on the issue, according to people who were familiar with the situation.

They have been discussing the possibility of a proxy battle after Alta Fox’s hedge fund, which holds 2.5% in Hasbro and nominated five directors for its 11-member board, has been discussed by both sides.

Alta Fox has privately indicated to Hasbro, the maker of Dungeons & Dragons and Play-Doh, that it would settle for two new directors, as long as one of them is one of the five Alta Fox nominees, and a board committee focused on capital allocation, the sources said.

According to sources, Hasbro has ruled out giving Alta Fox nominees any board seats. Alta Fox was informed that the Pawtucket, Rhode Island-based business believes that it could replace the Alta Fox nominees with other directors who are more experienced and of higher calibre.

Sources said that it is possible for the parties to reach an agreement before Hasbro’s annual shareholder meeting, where shareholders will be voting on the composition of the board. The spring is the expected date for that meeting.

Two sources asked for anonymity so that confidential discussions between them could be had.

Hasbro announced in a statement that they are committed to engaging shareholders. They have had multiple conversations with Alta Fox to get their views and tried to reach a solution to this issue.

Alta Fox’s representative stated, “We are disappointed that the board has refused to listen to shareholders”

Alta Fox, a firm founded four years ago by hedge fund veteran Connor Haley, has called on Hasbro to consider spinning off its prominent Wizards of the Coast unit to boost its lagging share price. The unit, which publishes Dungeons & Dragons and Magic: The Gathering, saw its revenue grow 42% in 2021, according to Hasbro.    Hasbro’s Brand Blueprint strategy is ineffective. It also included “ill-advised Acquisitions”, such as Entertainment One’s 2019 acquisition for $4.6billion. Hasbro argued that this holds it back. That its share price can surge to $200 per share in three years if there are “corrective measures.”

Hasbro shares ended Friday at $84.88 after falling to their lowest point in 52 weeks. They also fell more than 10% since 2005, when they were down over 10%. Alta Fox said it supports Chris Cocks as CEO of Hasbro, having previously led the Wizards of the Coast business unit. However, it believes that Cocks should have a refreshed board. 

Hasbro claims it is staffed by a highly qualified, engaged, independent and experienced board.