Hasbro Investor Wants to Spin Out Wizards of the Coast Into Separate Company
A minority stockholder in Hasbro is pushing to spin out Wizards of the Coast into its own company in an effort to drive up Hasbro's stock price. The Wall Street Journal was the first to report that Alta Fox Capital, which owns about 2.5% of Hasbro's stock, has proposed five new directors to Hasbro's board as well as a radical new direction for the company focused on growing profitability in the consumer and entertainment brand. As part of this plan, Alta Fox wants Hasbro to spin out Wizards of the Coast into its own company, which it says would result in Hasbro increasing its stock price by up to $100.
Wizards of the Coast manages Magic: The Gathering and Dungeons & Dragons, two of Hasbro's hottest franchises. Hasbro's eOne entertainment division has multiple projects involving both franchises, with a live-action D&D movie scheduled for release in 2023 and a Magic: The Gathering animated series due to come out on Netflix this year. Hasbro's current business strategy uses storytelling (primarily through shows and movies produced by eOne and other studios) to help drive toy and merchandise sales. Wizards of the Coast is a bit of an outlier in that its games serve both as storytelling medium and merchandise movers. Hasbro purchased Wizards of the Coast in 1999 after the company's successful launch of the Pokemon Trading Card Game and the purchase of D&D's former owner TSR.
While toys continue to be Hasbro's biggest driver of revenue, Wizards of the Coast has been its most profitable division in recent years. Last year, Wizards of the Coast reported an operating profit of $547 million in 2021, which equates to 72% of Hasbro's total company-wide operating profit. Hasbro's incoming CEO Chris Cocks formerly led the Wizards of the Coast and helped guide the division to taking own a more significant role within the parent company.
Per CNBC, Hasbro has said it will review Alta Fox's recommendations. "Hasbro engages in regular communication with its shareholders as part of its robust shareholder engagement program and welcomes constructive input," Hasbro said in a statement.
Hasbro will vote in new directors to its board this spring. Should Alta Fox's directors be added to Hasbro's board, it would signal the potential for greater change.