Game maker Hasbro.
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Hasbro is on the offensive against an investor activist who wants to add new members to the company’s board and nominate a profitable division that includes Dungeons & Dragons.
On Wednesday, the toy maker released a letter to shareholders detailing why they should vote for his current list of candidates, and warned directors offered by Alta Fox Capital Management, which owns 2.5% of the company’s shares worth about $ 325 million.
“Hasbro’s candidates have the right balance of skills, experience and fresh perspectives to guide our new CEO – Chris Cox – and our management team in implementing our long-term strategy for the benefit of all shareholders,” the letter to shareholders said. CNBC. “[Alta Fox] is trying to replace three of our highly qualified and experienced directors with candidates who lack relevant industry experience and, in our view, possess a lower skill set ”.
Alta Fox officials did not immediately respond to CNBC’s request for comment.
The letter comes three weeks before Hasbro shareholders intend to take part in a proxy battle between the toy company and the investor-activist.
Alta Fox initially nominated five directors to the company’s board, but narrowed the circle to three in April. The investor activist wants to abandon Hasbro’s current “brand” strategy and has proposed separating from Wizards of the Coast and the digital gaming business as part of a broader push to boost profitability in the consumer goods and entertainment divisions.
Alta Fox told shareholders in February that the branch would increase Hasbro’s share price by $ 100. Hasbro has since refuted this claim and said that separating Wizards of the Coast from its core business would be detrimental to both the division and the company as a whole.
“Nominees who lack relevant industry experience”
In a letter Wednesday, Hasbro said it had offered Alta Fox the opportunity to interview proposed directors on the nomination board committee. It says Alta Fox initially refused to give these interviews, but eventually allowed one of the nominees to speak to the committee.
Hasbro added that its board determined that Liz Hamren and Blake Jorgensen, who were nominated by Hasbro as directors, were the best additions to the board because “their significant experience and expertise in games, technology, operations and capital allocation”.
“In our view, the Alta Fox candidates, given their limited qualifications, will not be an adjunct to the board, helping Hasbro achieve its long-term strategy,” the letter said.
Hasbro used his letter to show the flaws he sees in each of the three proposed directors from Alta Fox.
The company said that Marcella Fischer, CFO of IDT Telecom, “has a long history of inadequate offices” and noted that his experience is in telecommunications and personal hygiene, neither of which “has anything to do with Hasbro’s business model.”
Hasbro also noted that Fisher’s company, IDT, has a business relationship with Alta Fox that has not been disclosed to shareholders.
The second proposed director of Alta Fox is Rani Hublu, who is a member of the Tecsys software board. The toy maker said it had asked to be interviewed at Hublou, but Alta Fox was not given the opportunity to do so. Hasbro said Hublou has experience that is “narrowly limited to marketing in enterprise software” and “has no qualifications in consumer businesses focused on games, entertainment or consumer goods”.
He also noted that Tecsys ’total shareholder returns have 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 poor experience in business transformation and has no critical industry experience, “Hasbro writes.” She has a short seven-month career and little success as AIG’s Chief Executive Officer, whose net income fell 84% during her tenure. “.
Hasbro also stated that Johnson had no experience in running or developing a consumer business, as well as experience in games, consumer goods or entertainment.
Where Hasbro stands
“It gets more personal the longer it lasts,” said Stephanie Visink, managing director of Jefferies. “Alta Fox’s latest move and Hasbro’s response are in line with that view.”
“This is what we dislike most in activist campaigns against corporate ones; without open communication, mutual respect and consent, people’s reputation remains a lever of influence in the proxy contest, which goes to the polls, ”she said.
Hasbro’s strategy uses storytelling to drive toy sales. Under the leadership of the late CEO Brian Goldner, Hasbro successfully went beyond just toys and games and switched to television, film and digital games.
It uses toy brands such as Transformers and My Little Pony, to power movies and TV shows, and then this entertainment content to power up toy sales. The company is currently releasing the film and TV show Dungeons & Dragons through eOne. He also used these brands for publishing, clothing and accessories.
While first-quarter results reported in April were weaker than expected, Hasbro said higher toy prices and demand would be profitable by the end of the year. Hasbro shares have fallen 11% since January.
Net income rose 4% to $ 1.16 billion, thanks to demand for toys based on Spider-Man: No Way Home, as well as role-playing games from the Magic: The Gathering and Dungeons & Dragons franchises.
The company has also raised its forecast for operating profit growth in fiscal year 2022 to average single digits compared to its previous low-digit growth estimate.
