Toy company Hasbro has refused a proposal to spin-off Dungeons and Dragons and Magic: The Gathering publisher Wizards of the Coast (WOTC) into an independent company. The initial proposal, made by asset management firm and Hasbro shareholder Alta Fox Capital Management, had encouraged the move in order to boost Hasbro’s share value and simplify its structure.
However, according to a letter from Hasbro Chairman Rich Stoddart cited by The Wall Street Journal and Yahoo! Finance on Monday, Hasbro believes the proposed spin-off “is unlikely to create value, is contrary to Hasbro’s strategy, and would negatively impact the benefits Wizards realises today”. Yahoo! Finance quotes Alta Fox (a Texas-based company with a 2.5% stake in Hasbro) as calling Hasbro’s recent rejection “defensive” and “reactionary”.
According to Alta Fox’s initial investor presentation from February 17, it believes WOTC is a “high-quality business” that is “significantly undervalued within Hasbro”. It claims that Hasbro’s falling share value is, in part, caused by many of Hasbro’s investors being “completely unaware” of WOTC’s value to the company. The presentation goes on to refer to Hasbro as “a ‘Wizards of the Coast’ business that also happens to make toys”.
Alta Fox argues WOTC is also harmed by being part of Hasbro, with the presentation quoting a former Wizards employee who reportedly says Hasbro’s financial decisions have “held WOTC’s development back by ten years”.
“As a standalone entity, WOTC’s long-term revenue growth and margin profile would markedly improve, and the market could appropriately value the asset, unlocking meaningful value for HAS shareholders,” it claims.
Further escalating the disagreement, Hasbro has also rejected a list of Alta Fox’s nominees for new board members. The activist investor had initially proposed five board members, but, in an interview with Yahoo! Finance last week, Alta Fox founder Connor Haley claims it compromised on adding just one nominee to Hasbro’s board.
This nominee was also rejected, however, and Hasbro announced on Monday it was instead appointing Discord COO Elizabeth Hamren and former Electronic Arts CFO and COO Blake Jorgensen. It’s not yet clear how, or if, Alta Fox intends to continue pressing its case for Hasbro offloading WOTC.
Back in February 2022, Hasbro said in a financial report that its subsidiary Wizards of the Coast earned over $1 billion / £736.5 million in revenue in 2021, doubling its revenues two years ahead of a five-year target.
For more financial news from Hasbro, find out why Magic: The Gathering supposedly had its “best year ever” in 2021. Or, for more D&D, why not check out the next book, Journeys Through the Radiant Citadel?