Hasbro hammers Wizards of the Coast spin-off plan (again)

DnD Hasbro shareholder letter - Hasbro and Alta fox logos, blue and white

Toy company Hasbro, the parent company of Dungeons and Dragons and Magic: The Gathering publisher Wizards of the Coast (WotC), released a letter to its shareholders on Monday urging them to vote against “five dissident director nominees” from asset management firm and 2.5% Hasbro shareholder Alta Fox Capital Management. Alta Fox made headlines recently by urging Hasbro to spin-off Wizards of the Coast into an independent entity and appoint their recommended directors to Hasbro’s board. Hasbro rejected both proposals at the start of April.

In Monday’s shareholder letter, Hasbro’s Board of Directors forcefully asks shareholders to reject Alta Fox’s nominees at the upcoming June 8 annual shareholder meeting, based prominently on the nominees’ alleged lack of industry experience, among other factors.

The letter claims that 2000 MTG World Champion Jon Finkel, who is one of the director nominees, “has absolutely no experience in leadership roles at corporate companies”. “We welcome his passion for our products,” Hasbro says, “but passion for a couple of product lines does not qualify him to sit on our Board”. The letter rejects another nominee, founder of software company Appian, Matthew Calkins, based on an alleged “history of shareholder unfriendly governance practices” – and the letter similarly criticises the relevant experience of the other three nominees.

Hasbro also refutes the validity of Alta Fox’s original proposal to spin off WotC. Alta Fox’s investor presentation from February 17 claimed that WotC is “undervalued within Hasbro”, and that a spin-off would boost Hasbro’s recently unstable share price, simplify corporate structure, and alleviate the harm Alta Fox believes WotC receives from being a subsidiary of Hasbro.

The full letter responds to Alta Fox’s arguments in great detail, with several statements challenging the truthfulness of the asset management firm’s statements.

DnD Hasbro shareholder letter - share price graph, 1 year

“Alta Fox’s claim that Wizards has suffered as part of Hasbro and is starved of resources could not be further from the truth”, Hasbro says, adding that “Alta Fox has also misleadingly claimed that our Board does not have enough gaming and technology experience”. The letter also claims that, with regards to the data used in its proposal, “Alta Fox has cherry picked its numbers”.

“Alta Fox’s analytical errors, weak candidate slate, demonstrated misunderstanding of our business and attempts to push the Hasbro Board and management team into a settlement, including in advance of the appointment of a successor CEO, are emblematic of an overall approach that will create a distraction, rather than drive thoughtful decision-making by a new CEO with a strong track record of value creation,” it adds.

The letter places further emphasis on Alta Fox’s proposal being a “distraction” by highlighting that the campaign began just days after Hasbro’s previous CEO Brian Goldner passed away. Goldner was succeeded by ex-WotC president Chris Cocks, who Hasbro says its shareholders should give “an opportunity to execute his game plan and drive the performance of Hasbro as a whole” based on his previous success leading Wizards of the Coast.

DnD Hasbro shareholder letter - Hasbro and Alta fox logos, blue and white

Hasbro recently announced that Magic: The Gathering had its “best year ever” financially, and the shareholder letter echoes this. It claims MTG has seen 150% growth in the last five years, with Wizards’ revenue reportedly increasing 42% in 2021 to $1.28 billion / £1 billion. Ultimately, Hasbro argues that Alta Fox’s proposals “would not create value for all shareholders”.

Wargamer reached out to Alta Fox Capital Management for a statement on the recent shareholder letter but has not yet received a response. You can read Hasbro’s full shareholder letter here.

In other recent Wizards news, Hasbro’s recent DnD Beyond acquisition cost just over $146 million. Magic: The Gathering seller Card Kingdom’s employees also announced their aim to unionise.