Hasbro Activist Alta Fox Seeks to Replace Toymaker’s Chairman

(Bloomberg) -- Alta Fox, the activist fund in the midst of a proxy battle with Hasbro Inc., is rallying other investors to vote against the re-election of the toy company’s chairman and two other board members at its annual meeting on June 8, according to a letter seen by Bloomberg.

The letter escalates an ongoing battle between the largest U.S. toymaker and one of its biggest shareholders, with a 2.5% stake, according to the fund. It’s unclear how much support Alta Fox has among other shareholders, but if any of its suggestions are implemented, the company could undergo a major change. 

Chairman Rich Stoddart has been on the board since 2008. And the other two board members Alta Fox is targeting, Lisa Gersh, chair of the compensation committee, and Edward Philip, have served for 12 years and 20 respectively. A representative for Hasbro was not immediately available for comment on the letter. 

The Pawtucket, Rhode Island-based company said in a proxy statement Monday, before the letter’s release, that shareholders should reject Alta Fox’s proposals. It also detailed discussions between Alta Fox and Hasbro representatives starting in October 2021. The talks ultimately included the fund’s managing partner, Connor Haley, and Hasbro’s new chief executive officer, Chris Cocks. On April 1, Hasbro’s board voted to add two new members and told Alta Fox its nominees would not be included in the slate for the annual meeting.

Haley said in his letter the board is “arrogant, insular and ineffective,” and argued the company never took his proposals seriously.

“We felt absolutely compelled to proceed with a campaign to elect highly qualified individuals with fresh perspectives and open minds,” Haley wrote in the letter, a copy of which was reviewed by Bloomberg. 

Alta Fox has argued that Hasbro is undervalued due to the influence of members of the founding Hassenfeld family, and general mismanagement. Haley said the company has rejected two takeover offers, in 1996 and 2010, that would have benefited shareholders.

Instead, Hasbro has focused on acquisitions of its own. Haley cited the $4 billion purchase of media company Entertainment One in 2019, as a deal that didn’t make financial sense. Haley also argued that Hasbro’s directors and managers have paid themselves too much.

Hasbro shares, Haley has noted, are lower than they were five years ago, dropping by about 12% to $89.54 between April 25, 2017 and Monday’s close. Over the same five-year period the S&P 500 has increased 79%, while shares of rival Mattel Inc. gained 4.8%.

Alta Fox has nominated three people to replace Stoddart, Philip and Gersh. The candidates are Marcelo Fischer, chief financial officer of IDT Corp., Rani Hublou, previously the chief marketing officer at 8x8 Inc. and Carolyn Johnson, once chief transformation officer at American International Group Inc. The fund previously had proposed that five new people should take the spots of existing Hasbro directors. Haley said he’d pared that down after Hasbro expanded its board and after speaking to other shareholders.

Haley reiterated that he supported the appointment of Cocks as Hasbro CEO in February. Cocks ran the company’s Wizards of the Coast division, which Haley has said is the strongest unit in Hasbro and should be spun off into its own entity. Hasbro has also rejected that idea.

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