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An activist investor has set its sights on Mattel increase; green up pointing triangle and is seeking changes to boost the toymaker’s lackluster stock.

Barington Capital has built an undisclosed stake in Mattel, according to a letter sent to Chief Executive Officer Ynon Kreiz that was seen by The Wall Street Journal.

At just over $18, Mattel stock has done little for decades as the company has struggled to court consumers in higher-inflation times and battled with a downturn in the toy industry as children shift their attention to videogames and smartphone apps.

Barington thinks Mattel’s share price will continue to underperform unless it takes steps that include pursuing strategic alternatives for its Fisher-Price and American Girl businesses, stopping what the investor views as excessive stock-based compensation and launching a $2 billion share-buyback plan.

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Barington founder James Mitarotonda said in the letter that he thinks these actions—together with improvements Mattel is already making in its core fashion-doll and toy-vehicle divisions—have the potential to more than double the share price in three years.

Barington is also asking the toy maker to separate the CEO and chairman roles, both of which are held by Kreiz, who joined Mattel as CEO in April 2018 and was appointed chairman of the board a month later.

A spokesperson for Mattel said the company is reviewing the activist’s letter. “We look forward to engaging with Barington as we do with all our shareholders.”

There is no guarantee Barington’s campaign will gain traction. Activist shareholders often take stakes and push for change, only to quietly go away if they are unsuccessful.

Hasbro, Mattel’s rival, in 2022 fended off a board challenge from an activist who wanted the toy maker to explore spinning off one of its units and make other changes.

Hasbro previously tried to take over Mattel, making an offer for a deal that would have united the two biggest U.S. toy makers and put Barbie and G.I. Joe under the same roof, the Journal reported in 2017.

El Segundo, Calif.-based Mattel’s portfolio of brands also includes Barbie, Hot Wheels, Thomas & Friends and Uno, the popular card game. The company has a market capitalization of about $6.5 billion.

Kreiz has been focused on efforts to tap in to the value of Mattel’s intellectual property through other ventures, such as films. He has helped repair Mattel’s relationships with retailers and Hollywood studios. The company has live-action movies in the works, including about Hot Wheels, Uno and the purple dinosaur Barney.

In its letter, Barington applauded Mattel on the recent theatrical release of the Barbie movie and the performance of other brands.

Regarding American Girl and Fisher-Price, which sits in Mattel’s infant, toddler and preschool segment, Barington wrote: “We believe that these brands are now detracting from the success at Mattel’s other segments, and hurting shareholder value.” It added that these two segments are “putting a dark cloud over the company.”

Barington was founded in 2000 by Mitarotonda, who has sat on the board of companies including Pep Boys and Avon Products. The firm has successfully pushed for changes at retailers and restaurant chains including L Brands, which broke up into Victoria’s Secret and Bath & Body Works, and Olive Garden parent Darden Restaurants.

Barington most recently pushed underwear maker Hanesbrands to overhaul its board and consider other ways to boost its stock price. The company subsequently entered into a cooperation agreement with Barington and named three new independent directors. Hanesbrands is also conducting a sale process for its Champion business.

This time of year is typically when activists kick into high gear, as many companies’ windows for shareholder nominations open ahead of annual meetings to be held in the spring.

Disney is facing activist onslaughts from Nelson Peltz’s Trian Fund Management and Blackwells Capital. A labor group is seeking representation on the Starbucks board, and railroad operator Norfolk Southern is up against an investor group calling for its CEO’s ouster, the Journal reported.

Source: The Wall Street Journal February 2, 2024 | By Lauren Thomas