Amid an ongoing proxy battle with activist investor Alta Fox Capital Management, Hasbro’s board of directors has taken a swipe at the toy maker’s push into original entertainment content with the purchase of the Peppa Pig studio Entertainment One in 2019.
Activist investor Alta Fox has urged Hasbro to spin off its gaming division to unlock shareholder value, a strategy the toy maker has advised shareholders to oppose.
“Our board has demonstrated its commitment to exploring all options for value creation. For example, while the timing of our eOne acquisition was unfortunate given the disruptive industry-wide impacts of the COVID-19 pandemic on TV and film production and theatrical distribution, as part of our continuous review of options to unlock shareholder value, the board approved a sale of eOne’s music business – which was not core to our brand blueprint strategy – while keeping valuable strategic assets from the acquisition intact,” Hasbro’s board said in a letter to shareholders on Monday.
The latest overture comes ahead of a June 8 shareholders meeting where Hasbro is urging investors to vote against Alta Fox’s five director nominees. Monday’s investor appeal also contrasts with an earlier April 4 letter from its newly-installed CEO that didn’t mention eOne directly and instead talked about the entertainment division as part of a broader games-driven growth strategy for the toy maker.
eOne was acquired by Hasbro for $4 billion in 2019, largely for the synergies offered by its successful film and TV unit, which includes such hits as Peppa Pig and PJ Masks. At the time, Hasbro looked to the eOne deal to make the toy maker into a media contender as it combined the indie studio’s film and TV unit with its own.
But the pandemic upended that media strategy with an industry production shutdown in early 2020. And after the death of CEO Brian Goldner, Chris Cocks became the company’s top exec after serving as president and COO of Hasbro’s Wizards of the Coast and digital gaming division, the success of which drew the attention of Alta Fox.
On Monday, Hasbro’s board reiterated that spinning off the gaming division was not required to realize shareholder value at the toy maker. “Our focus on key strategic investments is evident in our recently announced decision to acquire D&D Beyond,” the company said after recently acquiring D&D Beyond, a digital toolset for players of the toy giant’s Dungeons & Dragons fantasy franchise, from Fandom for $146.3 million in cash.
“This acquisition is expected to accelerate our growth in gaming and direct to consumer and is in line with Chris and the board’s focus on disciplined capital allocation. The investment decision was made following a disciplined assessment of its growth and profitability impact, strategic value, synergy opportunity and projected return on investment,” Hasbro’s board urged shareholders in its letter on Monday.
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