Hasbro activist wants toy company to spin off Wizards of the Coast, add new board members – CNBC
An activist investor wants to add new members to Hasbro’s board and is urging the toy company to make changes to its current business strategy, including spinning off its lucrative Wizards of the Coast unit, according to a report by the Wall Street Journal.
Alta Fox Capital Management, which owns a 2.5% stake worth around $325 million, penned a letter to Hasbro shareholders nominating five directors and urging the company to replace its “brand blueprint” strategy with a plan that focuses on growing profitability in its consumer products and entertainment divisions, CNBC confirmed.
The letter suggests that spinning off Wizards of the Coast and digital gaming, which include franchise brands like Dungeons and Dragons and Magic: The Gathering, will increase Hasbro’s share value by $100.
Hasbro’s stock closed at around $97 per share on Wednesday, down about 23% from an all-time high of $126.87 per share achieved prior to the pandemic and prior to the acquisition of Entertainment One (eOne).
Alta Fox argues that Hasbro can double its valuation by spinning off Wizards, which it says has a different growth, margin and valuation profile compared to the company’s other segments. It also seeks to replace Hasbro’s current strategy for developing brands, a blueprint put in place by the company’s late CEO Brian Goldner, who unexpectedly passed away last October.
A Dungeons & Dragons classic dragon hand painted by Alan Cooley, 27, of Huntington Station, New York, at Main Street Game Cafe in Huntington on November 26, 2019.
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This strategy uses storytelling to drive toys sales. Under Goldner, Hasbro successfully grew beyond just toys and games and into the television, movies and digital gaming space. It uses its toy brands like Transformers and My Little Pony to fuel entertainment content and then that entertainment content to fuel sales of toys. The company is currently producing a Dungeons and Dragons movie and television show through eOne.
It has also used these brands for publishing, apparel and accessories.
“Hasbro engages in regular communication with its shareholders as part of its robust shareholder engagement program and welcomes constructive input,” Hasbro said in a statement to CNBC.
Hasbro said that it has met with Alta Fox and plans to review its nominees “in due course.”
Alta Fox’s letter to share holders comes a week after the company reported a significant fourth-quarter earnings beat, but said it does not expect robust growth in the next few years.
Deborah Thomas, the company’s chief financial officer, said during an earnings call that while the toy and game industry has grown at an above-trend rate over the last two years, the toymaker does not foresee this continuing, saying it expects the industry will slow or decline in the coming year.
Also of note, Hasbro has a new CEO starting on Feb. 25. Chris Cocks, the former Wizards of the Coast president, is taking the reins from interim CEO Rich Stoddart, who held the position after Goldner’s unexpected passing. Analysts speculated that Hasbro may be intentionally setting its goals low for the next few years as Cocks settles into his new post.
Additionally, Hasbro is taking into account the impact the pandemic has had on its film production. Its newest “Transformers” film was delayed until 2023, which translates into delays in ticket sales and product lines. What’s more, Hasbro was the company that held the Disney princess license and lost out to Mattel.
Still, despite pandemic headwinds, including global supply chain …….