Barington Capital Group's Recommendations to Mattel Inc (MAT) to unlock shareholder value
Key Summary: Barington Capital urges Mattel to address underperformance through strategies such as exploring Fisher-Price and American Girl options, reducing stock-based compensation, and initiating a $2 billion share repurchase. Improved governance is also proposed.Market Cap: $6.7 billion | Mattel, Inc., a children's and family entertainment company, designs and produces toys and consumer products worldwide.
On February 1, 2024, Barington Capital Group sent a letter to the Chairman of the Board calling for immediate actions to create long-term value for shareholders. In its letter, Barington highlighted that despite the Company's strong brands and recent improvements in performance, Mattel's share price has declined by 13.2% over the last two years, underperforming the S&P 500 by approximately 22.3%. Barington also pointed out that during the nearly six years of Mr. Kreiz's tenure as CEO of the Company, Mattel's shares have increased at an average annual rate of 4.6%, while the S&P 500 index increased at an average annual rate of 11.2% and the Nasdaq Composite grew at an average annual rate of 14.4%.
To address this, Barington called for the following actions:
o Exploring options for Fisher-Price and American Girl.
o Reducing excessive stock-based compensation.
o Initiating a $2 billion share repurchase program.
o These actions, combined with core segment improvements, could have doubled Mattel's share price in three years.
o Separating the CEO and Chairman roles for improved governance.
Barington Capital Group suggested that if Mattel couldn't address these issues within the company, they should explore strategic alternatives, citing SpinMaster's acquisition of Melissa & Doug as an example. This move could have generated strong demand for these brands, freed up capital, and potentially improved the company's earnings multiple.