PAWTUCKET – Another activist investor has entered the proxy fight with Hasbro Inc.
Ancora Holdings, which has a 1% stake in the Rhode Island-based toy maker, is encouraging the replacement of some unnamed, “long-tenured incumbents” on Hasbro’s board of directors and the partial sale of Entertainment One in its letter to Hasbro shareholders.
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The investor claimed Hasbro should “cut its losses” and execute a transaction that could reap $2 billion and tax benefits. It also urged Hasbro to spin off the Wizard’s of the Coast division, noting that its shares “are currently trading at a 75% discount to intrinsic value.”
“We contend Hasbro’s venture into content production has been an abject failure with extremely limited long-term potential and substantial execution risk. It is clear to us – and apparently many of our fellow shareholders – that eOne is a nonsynergistic business that is capital-intensive, low margin and very volatile,” the letter states. “Rather than use the excuse of unfortunate timing due to the 2020 pandemic, the board should own the reality that the entertainment production industry is difficult and littered with failures.”
Hasbro bought Entertainment One for about $4 billion in 2019 to expand into the infant and preschool market by gaining access to popular TV shows such as “Peppa Pig” and “PJ Masks.”
Ancora’s move comes after Alta Fox urged Hasbro investors to vote against Hasbro board Chairman Rich Stoddart and board members Lisa Gersh, chairwoman of the compensation committee, and Edward Philip in its letter on April 27 to the toy maker’s shareholders.
Alta Fox, which owns about 2.5% of Hasbro’s shares, has demanded that the company spin off its Wizards of the Coast division into a separate company, but Alta Fox has been rebuffed by Hasbro executives and the board of directors.
In a letter to shareholders issued April 25, Hasbro called the proxy campaign by Alta Fox Capital Management “ill-timed” and contended that Alta’s nominees lack “any relevant industry expertise.” The letter added the activist investor “lacks an understanding” of the company and its slate of candidates for Hasbro’s board of directors should be rejected in a June 8 proxy vote.
On March 27, Hasbro turned down a settlement offer from Alta Fox to have only one of its nominees added to the Hasbro board. In March, Hasbro nominated five directors to its 13-member board, which is scheduled to shrink to 12 members next year and 11 members by 2024.
Ancora’s full letter to Hasbro’s shareholders can be reviewed here.
