PAWTUCKET – Hasbro Inc. shareholders have voted to reelect all of the company’s 13 directors to its board, rejecting a slate of three nominees from activist investor Alta Fox Capital Management, which had waged a contentious monthslong proxy battle for more influence over the Rhode Island-based toy maker.
Hasbro said its 13 existing directors – Richard Stoddart, Kenneth Bronfin, Michael Burns, Hope Cochran, Chris Cocks, Lisa Gersh, Elizabeth Hamren, Blake Jorgensen, Tracy Leinbach, Edward Philip, Laurel Richie, Mary Beth West and Linda Zecher Higgins – were reelected by a substantial margin. The votes were counted Wednesday.
The company’s say-on-pay proposal and auditor ratification were approved by the shareholders.
“Hasbro’s board of directors would like to thank our shareholders for their continued support and engagement, as well as the invaluable views and perspectives they have shared with us over these last several months,” the company said in a statement. “As the vote indicates, our highly skilled and recently refreshed Board possesses experience and expertise directly relevant to overseeing Hasbro’s world-class portfolio of assets across multiple play and entertainment categories … We know we have important work ahead of us, and you will be hearing from us as we continue to actively engage with our shareholders.
Connor Haley, managing partner of Alta Fox, expressed his disappointment with the outcome, though remained steadfast in the activist investors’ efforts.
“Alta Fox believed targeted boardroom change was necessary at the onset of a new Chief Executive Officer’s tenure,” Haley said in statement. “We ran a campaign based on the facts: absolute and relative underperformance, numerous capital allocation blunders under long-serving incumbents, and extremely poor disclosure reflective of an insular culture. While we are disappointed in the outcome at today’s Annual Meeting, we agree with Institutional Shareholders Services, Inc. that ‘all shareholders likely benefited from the campaign.’
“We will seek to maintain a dialogue with the Board to ensure a culture of accountability is put in place as Chris Cocks develops and implements what will hopefully be a superior and well-articulated strategy for value creation. However, the strong shareholder response to our campaign – including support from long-term shareholders, institutional active investors and index funds – has made evident that meaningful improvements in governance and ultimately total shareholder returns are required. Hasbro’s assets are too high quality to continue to underperform their potential,” Haley added.
In a letter to Hasbro shareholders before the vote, Alta Fox urged investors to unseat Hasbro board Chairman Stoddart and board members Gersh, chairwoman of the compensation committee, and Philip.
Alta Fox had nominated three people to replace Stoddart, Philip and Gersh. The nominees were Marcelo Fischer, chief financial officer at IDT Corp.; Rani Hublou, former chief marketing officer at 8×8 Inc.; and Carolyn Johnson, former chief transformation officer at American International Group Inc.
“We felt absolutely compelled to proceed with a campaign to elect highly qualified individuals with fresh perspectives and open minds,” Haley wrote to Hasbro’s shareholders. “We believe Hasbro suffers from an arrogant, insular and ineffective board culture under Rich Stoddart and other long-tenured directors.”
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.
Hasbro called the proxy campaign by Alta Fox “ill-timed” and contended in a letter to its shareholders that Alta’s nominees lack “any relevant industry expertise.” The letter added the activist investor “lacks an understanding” of the company and that its slate of candidates for Hasbro’s board of directors should be rejected.
In March, representatives for Hasbro and Alta Fox attempted to negotiate a settlement over representation on the board of directors.
Hasbro said in a U.S. Securities and Exchange Commission filing that it proposed adding a director that both Alta Fox and the company could agree upon. Hasbro also said it offered to have Cocks meet with Alta Fox at “regular intervals” and provide “enhanced” financial disclosures on Wizards of the Coast.
In turn, Alta Fox offered a settlement in which it would have only one of its nominees added to the Hasbro board.
Both sides could not reach an agreement.
In April, Hasbro added two members to expand its board to 13, which is scheduled to shrink to 12 members next year and 11 members by 2024.
Ancora Holdings, which has a 1% stake in the toy maker, also encouraged the replacement of some unnamed, “long-tenured incumbents” on Hasbro’s board of directors and the partial sale of Entertainment One in its May 3 letter to Hasbro shareholders.
The investor said 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.”
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.”
(Update: Comment from Alta Fox Managing Partner Chris Haley added in 6th and 7th paragraphs)
