Hasbro Activist Begins Proxy Fight, Urges Wizards Unit Spinoff
Alta Fox Capital Management nominates five directors to company’s board, saying stock has been trailing broader market
A little-known activist investor is seeking to add several directors to Hasbro Inc.’s HAS 0.61% board and is urging the toy maker to make changes including a spinoff of its fast-growing unit housing games such as Dungeons & Dragons.
Alta Fox Capital Management LLC, which has a 2.5% stake in Hasbro worth roughly $325 million, has nominated five directors to its board, according to a letter viewed by The Wall Street Journal that will be sent to the company’s shareholders. Shareholders will vote on director nominees at Hasbro’s annual meeting this spring.
Alta Fox, which says in the letter that it has spoken to Hasbro, noted that the company’s stock price is lower than it was five years ago and has significantly trailed the broader market. Alta Fox believes Hasbro could double its valuation by spinning off the unit that houses the Dungeons & Dragons business.
Hasbro said in a statement it will review Alta Fox’s nominees. It said it is excited to welcome its new chief executive officer, Chris Cocks, who previously led the unit housing Dungeons & Dragons, known as Wizards of the Coast and Digital Gaming.
“He brings extensive omni-channel experience and proven track record for value creation at Wizards to supercharge Hasbro’s growth and capitalize on all elements of our Brand Blueprint across consumer products; Wizards and digital gaming; and entertainment,” the company said.
Pawtucket, R.I.-based Hasbro, which has a market value of about $13 billion, owns such brands as Nerf and Monopoly. It holds the rights for toys based on the popular children’s show “Peppa Pig” and Walt Disney Co. ’s blockbuster “Frozen” movies, though Mattel Inc. recently won back the lucrative rights to “Frozen.”
Hasbro named Mr. Cocks as its new chief executive officer in January following the death of longtime CEO Brian Goldner last year.
Hasbro and Mattel, whose brands include Barbie and Hot Wheels, have been fierce rivals over the years. In 2017, when Hasbro was twice the size of Mattel, it made an unsuccessful takeover offer for its rival. Mattel has since improved its footing with cost cuts, an overhauled leadership team and updates to its brands, though its stock has also languished and the company’s market value stands at about $9 billion.
Both companies enjoyed a boost during the Covid-19 pandemic as lockdowns spurred parents to spend on toys, though decreased attendance at movie theaters hit some character-driven toy sales.
A bright spot in Hasbro’s business has been the Wizards of the Coast and Digital Gaming unit, which in addition to the cult-favorite role-playing game Dungeons & Dragons includes the card game Magic: The Gathering. The unit’s revenue rose 42% in 2021 to $1.29 billion and accounted for roughly 46% of the company’s $1.31 billion of adjusted earnings before interest, taxes, depreciation and amortization.
Alta Fox estimates in the letter that if the division was separated, it could be worth roughly as much as Hasbro, or $13 billion or more.
The activist takes issue with Hasbro’s capital allocation, including its acquisition of Entertainment One in 2019, and its Brand Blueprint strategy, which focuses on promotion through multimedia storytelling.
The nominees include the founder and CEO of cloud-computing company Appian Corp. , Matthew Calkins, and Jon Finkel, a managing partner of an investment firm who has played games including Magic professionally.
Fort Worth, Texas-based Alta Fox is working with EnTrust Global, the investment firm run by Gregg Hymowitz that backs many of activist investors’ biggest bets, a person familiar with the matter said.
Alta Fox’s flagship fund was launched in 2018 by Connor Haley, who previously worked at New York hedge fund Scopia Capital Management LP. Though it has kept a relatively low profile since then, Alta Fox in 2020 ran a successful campaign at Collectors Universe Inc., which authenticates and grades collectibles. The company was later sold to a group of investors that included the hedge-fund manager Steven A. Cohen.