Alta Fox Files Definitive Proxy Statement and Sends Letter to Hasbro Shareholders
Asserts that Shareholder-Driven Change is Needed at the 2022 Annual Meeting to Mitigate Further Value Destruction Under
Highlights Risks Associated with Reelecting Incumbents Responsible for Years of Underperformance and Egregious Capital Allocation, Including the
Puts Spotlight on Hasbro Chairman
Questions the Board’s Entrenchment Agenda and Unwillingness to Embrace Shareholder Input Following Years of Poor Returns
Urges Shareholders to Elect Alta Fox’s Three-Member Slate on the GOLD Proxy Card to Inject Capital Allocation, Strategic Planning and Transformation Expertise into the Boardroom
Learn more about the Alta Fox slate and how to vote for boardroom change on the GOLD proxy card by visiting www.FreeTheWizards.com.
Unfortunately, Hasbro’s high-quality assets have failed to deliver on their promise under the current Board of Directors (the “Board”). The Company has been a chronic underperformer and currently trades at a significant discount to its intrinsic value. In fact, its share price is materially lower today than it was five years ago, making it a troubled investment for many of its shareholders. In our view, Hasbro’s stagnation and poor shareholder returns are largely due to an arrogant, insular and ineffective Board. For too long, a group of seemingly unqualified directors has presided – without sufficient accountability – over abysmal capital allocation, excessive executive compensation, highly concerning governance, opaque disclosures and a flawed corporate structure.
It is important to stress that we have gone to great lengths to try to compromise with the Board and collaborate on a viable director refresh that would have addressed our concerns and advanced all stakeholders’ interests. Unfortunately, the Company did not appear to take our efforts seriously:
- When we made director candidates available for interviews, the Board was primarily focused on trying to convince our nominees not to associate with us – rather than objectively evaluating their credentials and qualifications.1 This was particularly alarming given our candidates have backgrounds as public company c-suite executives and directors with diverse experience in relevant areas.
- When we made a good faith settlement proposal, the Board refused to have any substantive discussions about shareholder representation and the value of a viable refresh versus a reactionary expansion of the number of directors.
- The Board’s only attempt to avoid an election contest was offering to give us public credit for its own defensive measures, such as its addition of two new directors without strong capital allocation, governance and strategic transformation backgrounds.
- The Board demonstrated just how disingenuous it is by ultimately asking Alta Fox to rubberstamp the Company’s hand-picked candidates.
- The Board was covertly focused on expanding from an already bloated 11 members to an indefensible 13 members.
The Board dismissed compromise in favor of hiring an army of expensive advisors that includes two law firms, two proxy solicitation firms and two investment banks for defense support, in addition to a cadre of public relations consultants apparently peddling blatant distortions to talking heads like
Andrew Ross Sorkinand Jim Cramer.
After assessing this appalling level of arrogance and considering the risks associated with further empowering this Board, we felt absolutely compelled to proceed with a campaign to elect highly qualified individuals with fresh perspectives and open minds at the 2022 Annual Meeting of Shareholders (the “Annual Meeting”).
We have recently had conversations with a large number of our fellow shareholders about Hasbro’s most pressing needs and who the right change agents would be on a truly refreshed Board. Following these discussions, we have proactively modified our slate to include three members who are particularly well-suited to help reset the culture in Hasbro’s boardroom. The candidates we are running –
Looking ahead, we believe that this election contest is about one question:
Are shareholders better off maintaining an insular and entrenched Board that has overseen dismal returns OR with a truly refreshed and more independent Board with greater capital allocation acumen, business transformation expertise and governance experience?
We believe the answer is clear. If our three-member slate is elected, the Board will have a better mix of institutional knowledge, fresh perspectives, capital allocation discipline and objectivity when it comes to charting a go-forward business strategy. As first-time Chief Executive Officer
HASBRO HAS BEEN RUN LIKE A PRIVATE COMPANY FOR DECADES DUE TO THE HASSENFELD FAMILY’S INFLUENCE – AND SHAREHOLDERS HAVE PAID THE PRICE
In our view, Hasbro has often put the Hassenfeld family’s interests ahead of those of other shareholders. Since 1970, Hasbro's leadership has consistently included several members of the Hassenfeld family, including current Chairman Emeritus
Shareholders should not forget that when Mattel, Inc. ("Mattel") offered to buy Hasbro for a 73% premium in an all-equity transaction in
The consequences of prioritizing the Hassenfeld family's interests over those of the Company's shareholders are clear to us when taking into account the following:
- Hasbro underperformed the S&P 500 by more than 100% during Mr. Hassenfeld’s 14-year tenure as CEO, while also underperforming Mattel by over 340%.
Mr. Hassenfeld'sCEO tenure ended in May 2003, Hasbro's share price remained more than 30% below the market implied Mattel offer price in 1996.
Hasbro has underperformed the S&P 500 by more than 200% since
June 2010, when the Board rejected Providence'sinterest in acquiring the Company. 4
While the Hassenfeld family may no longer hold a controlling stake in Hasbro, we believe Hasbro's boardroom still contains the same insular, controlled Company culture today. With the exception of the new directors added just weeks ago in response to our campaign, all current independent Board members were appointed during
WE BELIEVE HASBRO SUFFERS FROM AN ARROGANT, INSULAR AND INEFFECTIVE BOARD CULTURE UNDER RICH STODDART AND OTHER LONG-TENURED DIRECTORS
Under the current Board, Hasbro has underperformed the broader market and relevant indices – including the Company's own benchmark, the Russell 1000 Consumer Discretionary Index – across nearly every relevant time horizon. Over the past five years, Hasbro has lagged the S&P 500 by more than 100%. This is the case despite operating in a strong bull market fueled by unprecedented stimulus and historically low interest rates. Today, Hasbro's shares trade near a 52-week low, indicating to us the market's clear lack of faith in the Board.
As Hasbro’s shareholders have suffered over the last five years, its senior leadership and directors have collectively received more than
We are not alone in our criticism of the Board's inability to set equitable compensation targets for management. Following the target cuts in 2012 and 2013, shareholders voted overwhelmingly against Hasbro's say-on-pay proposal at the 2014 Annual Meeting. In connection with last year’s Annual Meeting, a leading independent proxy advisory firm,
We believe Hasbro's egregious and misaligned compensation structure is symptomatic of poor boardroom stewardship under the Stoddart-led Board.
A CLOSER LOOK AT CHAIRMAN RICH STODDART’S RECORD OF VALUE DESTRUCTION AND THE HASSENFELD FAMILY’S UNBROKEN GRIP ON HASBRO
The primary qualification of
Mr. Stoddart’s latest operating role was as CEO of
Innerworkings(“INWK”), a formerly public company, where results under his tenure were disastrous for shareholders. INWK’s share price declined an astonishing 68.49% during his roughly two-and-a-half years as CEO, before the company was sold. This compared to a 32.30% return for the S&P 500 during the same time period.
While investors lost nearly over two-thirds of the value of their investment in INWK,
Mr. Stoddartmade over $13 millionduring his short tenure as CEO and even accepted a generous change-in-control bonus when the company was sold at a depressed price.
Prior to INWK,
Mr. Stoddartwas CEO at Leo Burnett, an advertising agency. During his tenure there, Stoddart “presided over some major, demoralizing account losses, including the U.S. Army, Morgan Stanley and several chunks of Con Agrabusiness.” Reports at the time indicated that Mr. Stoddart“might not have moved fast enough—or boldly enough” to prevent losing key accounts.6
With such catastrophic performance in his prior roles, our view is that
A CLOSER LOOK AT THE BOARD’S RECKLESS AND WASTEFUL CAPITAL ALLOCATION DECISIONS
We believe the current Board has embraced a reckless capital allocation policy, characterized by nebulous brand-building initiatives with limited financial accountability and little investor transparency. In particular, we think that shareholders have suffered immensely due to the Board's lack of financial discipline on major capital allocation decisions, including acquisitions.
We view the defining moment of the “Brand Blueprint” era as the 2019 acquisition of eOne for
We also believe that Hasbro has wasted significant capital in its core Consumer toys and boardgame business and Wizards of the Coast segment. Despite pouring more than
In addition to poor capital allocation decisions, we view Hasbro's opaque disclosure practices under the incumbent Board as a key reason for why the Company trades at a significant discount to its intrinsic value. For example, Hasbro chose to not report revenue and EBITDA for Wizards of the Coast – which represented 42% of the Company's total EBITDA in FY 2020 – until 2021 and continues to withhold other key performance indicators for the segment. Even in recent results, the Company makes it impossible for investors to understand what large internal projects are being developed and how those projects are being accounted for in the financial statements.9 Most recently, the Board swiftly rejected our idea for a financial or operational spin-off of Wizards of the Coast without providing the details of its rationale or analysis with shareholders. In light of the Board’s apparent credibility issues, we find it hard to believe that the Company comprehensively and objectively evaluated strategic alternatives for the unit. Shareholders deserve a detailed explanation of the Board’s purported evaluation, and the analysis should be re-examined with shareholder-appointed directors focused on creating shareholder value rather than preserving the Hassenfeld family legacy. To date, the Company has provided little evidence of business unit “synergies” that could not be accomplished through a partnership arrangement.
We urge shareholders to see through the Board's deception and remember that under the direction of the incumbent Board, Hasbro has consistently underperformed, rebuffed potential acquirers and wasted billions of dollars in shareholder capital without ever acknowledging mistakes.
IT IS TIME TO REMOVE INEFFECTIVE INCUMBENTS AND INSTALL HIGHLY QUALIFIED DIRECTORS WITH FRESH EXPERIENCE AND IMPARTIAL VIEWPOINTS
In our view, both a change in culture and shift in strategy are urgently needed to clean up Hasbro's boardroom and unlock the full value of the Company. With the addition of our independent and highly qualified director candidates, we believe the Board will be positioned to embark on a disciplined strategy that delivers superior value for all stakeholders.
We are seeking to replace three directors: the Chairman, the Head of the Compensation Committee and the Company’s longest-tenured director. These individuals have collectively overseen significant stagnation and underperformance, do not possess the backgrounds, skills or vision needed to transform Hasbro at this critical moment and are not qualified to serve on the Board. In addition to being appointed during
We believe Chairman
Rich Stoddart, who has served on the Boardfor eight years, is unqualified to continue serving. As detailed above, Mr. Stoddarthas a long track record of value destruction, at Hasbro and elsewhere. We also believe that Mr. Stoddartlacks relevant capital allocation, technology and strategic planning expertise necessary to effectively serve as a director – let alone Chairman – of Hasbro.
Lisa Gersh, who has served on the Boardfor nearly 12 years and overseen Hasbro’s egregious compensation practices, is unqualified to continue serving on the Board. As Chair of the Company's Compensation Committee, shareholders should hold Ms. Gershdirectly responsible for the Company’s excessive and unjustifiable executive compensation practices, under which management has been paid more and more despite chronic underperformance and dismal shareholder returns. In addition to her track record as a director of Hasbro, we note that Ms. Gersh’s previous tenures at Martha Stewart Living Omnimedia, Inc.("Martha Stewart") and Knot Inc.("Knot") were also disastrous for shareholders. Martha Stewart delivered a negative 30% annualized return for shareholders during Ms. Gersh’s time as President and later CEO. In a seemingly self-serving move, Ms. Gershabruptly resigned from Knot's board, which put the company in non-compliance of Securities and Exchange Commissionstandards with fewer than three members on its audit committee.10 Two days later, she joined Hasbro's Board.11
We believe it is time for Board member
Edward Philip, who has served on the Boardfor nearly 20 years, to move on. We question how Mr. Philipis even able to focus on Hasbro given that he currently serves on the boards of five other companies, including a poorly performing SPAC, Blade Air Mobility Inc.(NASDAQ: BLDE). The fact that Mr. Philip, who is woefully over-tenured by any reasonable standard, appears to have been unwilling to step down as part of Hasbro’s defensive Board refresh after spending two decades on the Board suggests serious entrenchment issues.
On the heels of
Marcelo Fischerhas a strong background in capital allocation, corporate finance, strategic transactions and the consumer and technology sectors.
- Currently the Chief Financial Officer of
(“IDT”) (NYSE: IDT), a multinational provider of cloud communications and financial services, and has also served as the CFO of IDT Corporation IDT Telecomsince June 2007. During Mr. Fischer’s tenure as CFO, IDT (inclusive of all spin-off transactions) has compounded shareholder value at 25% a year compared to the S&P 500 at less than 10% annualized.
- Continues to play a key role in unlocking shareholder value at IDT with several successful spin-offs executed historically at IDT and two new spin-offs currently in the works. Importantly,
Mr. Fischerhas been instrumental in promoting investor transparency across complicated and unrelated business segments while at IDT.
- Received a B.A. in Economics from the
University of Marylandand an M.B.A. in Finance from the New York University Stern School of Business.
- Mr. Fischer’s significant spin-off experience, cost discipline and demonstrated track record of value creation in public markets through optimizing corporate structures and promoting investor transparency make him highly qualified to help solve the existing challenges at Hasbro.
- Currently the Chief Financial Officer of
Rani Hublouis a proven corporate leader with vast experience in strategic planning – including overseeing subscription-based revenue model transitions – product innovation, supply chain management, corporate governance, and marketing.
- Former Chief Marketing Officer of 8x8, Inc. (NASDAQ: EGHT), Chief Product Officer at
Comprehend Systems, Inc.and Chief Marketing Officer and Sales Executive at PSS Systems, Inc.(acquired by International Business Machines (NASDAQ: IBM)).
- Former strategic consultant at
McKinsey & Company, Inc., a leading management consulting firm.
- Director of
(TSX: TCS), a supply chain management software company, since 2020 where she is helping oversee a business model transformation from perpetual to subscription license sales. Tecsys Inc. Ms. Hubloualso serves on the compensation committee and has aligned management performance targets according to Tecsys transformation goals.
- Received an M.S. and a B.S. in Industrial Engineering from
- Ms. Hublou’s deep strategy experience in areas such as transitioning businesses to subscription-based revenue models and navigating complex supply chains would add significant value to the
Board of Hasbrogiven Hasbro’s complex supply chain and numerous DTC subscription opportunities within its core franchises.
- Former Chief Marketing Officer of 8x8, Inc. (NASDAQ: EGHT), Chief Product Officer at
Carolyn Johnsonhas a proven track record of delivering significant value to shareholders through her experience as a business transformation leader and corporate governance expert with compensation committee experience, and a strong negotiation background with several successful asset sales totaling billions of dollars.
- Drove significant value for shareholders during her tenure at
Majesco, LLC(formerly NASDAQ: MJCO), which delivered an 84% annualized total shareholder return during her tenure. Ms. Johnsonhelped negotiate the ultimate sale price of Majescoto Thoma Bravo, which improved from $13.10to $16.00, a greater than 100% premium to Majesco’s pre-deal trading price. She also served on Majesco'scompensation committee.
- Recently served as the Chief Transformation Officer of
(NYSE: AIG), an international insurance organization where she executed on Carl Icahn’s activist plan for change, resulting in American International Group, Inc. $250 millionof cost savings in the first eight months and developing a roadmap to $1 billionin savings over a three-year period.
- Previously held the position of Chief Executive Officer of Annuities and Individual Life at
(NYSE: VOYA), an insurance company. After leading the division for four years, Voya Financial, Inc. Ms. Johnsonled its sale to Apolloin 2018 for $1.1 billion.
- Received a B.S. in Business Administration with a focus in Finance from
California State University, Los Angelesand completed the Finance for Senior Executives course at Harvard Business School.
- Ms. Johnson’s relentless focus on creating shareholder value, track record of success as both a director and operator, corporate governance and compensation expertise, and success executing complex transactions and transformations, would provide significant value to the Hasbro boardroom in light of the Board’s strategic execution and governance failures to date.
- Drove significant value for shareholders during her tenure at
We suspect Hasbro has dismissed our candidates because they represent exactly what the Board fears: truly independent perspectives that will demand accountability, discipline and transparency in the boardroom. After five years of languishing returns, Hasbro needs new directors to reverse the underperformance and ensure that minority shareholders have the proper governance they deserve. It is very telling that a Board with such a poor track record would be so arrogant and reject legitimate settlement offers from us, choosing instead to drag all stakeholders into a distracting and expensive contest.12 We are asking you to help bring accountability to Hasbro by removing long-tenured and underperforming directors, and replacing them with the three engaged and experienced change agents we have nominated.
We thank you in advance for your consideration and willingness to evaluate our case for boardroom change. To contact us or to learn how to vote on the GOLD proxy card for our slate, please visit www.FreeTheWizards.com.
About Alta Fox
Founded in 2018 by Connor Haley, Alta Fox is a
1 For example, when interviewing
2 Bloomberg Business News
3https://toynewsi.com/news.php?itemid=16035 and https://www.marketwatch.com/story/hasbro-says-not-interested-in-selling-company-2010-06-24.
4 If we assume that
5 Company's 2022 proxy statement and
9 For example, Hasbro does not break out capitalized development expense by segment. It is therefore impossible for investors to know how much of Wizards of the Coast’s research and development is capitalized versus expensed — a key question for any investor trying to understand the unit economics.