Independent proxy advisory firms, Institutional Shareholder Service and Glass Lewis, have sided with Hasbro (HAS) Friday in their fight with hedge fund Alta Fox.
Alta Fox, which owns a 2.5% stake in the Rhode Island-based toymaker, is hoping to change the direction of Hasbro by ousting board directors.
The activist investor has been critical of Hasbro’s leadership and brand strategy claiming it has caused Hasbro to underperform and be “severely undervalued.”
It has also criticized Hasbro’s capital allocation, including the 2019 purchase of Entertainment One for $4.6 billion.
Alta Fox has been pushing for Hasbro to spin off Wizards of the Coast, whose core brands, Dungeons & Dragons and Magic: The Gathering, have experienced record growth of late.
In presentations to investors, Alta Fox says the lucrative WotC has a different profile than Hasbro’s core business which have caused under-investment in the tabletop gaming company during a time of explosive growth.
Alta says Hasbro have mismanaged cross-company projects with WotC which have saddled the company with overhead and expenses that haven’t led to growth.
Hasbro acquired WotC in 1999 for about $400 million.
Hasbro disagrees with Alta’s assessment. In a letter issued to shareholders today the company admitted that returns have been trailing the market and that there was room for improvement.
It said it would continue to listen to shareholders, but encouraged investors to vote for all of their nominees for the board as Alta Fox’s nominees would just serve to disrupt the company from its current “Brand Blueprint” strategy.
Shareholders will have a chance to settle the argument on June 8 during Hasbro’s annual meeting.
