Toy Wars


Chapter One
Lucky Pennies.

Alan G. Hassenfeld had no appetite for breakfast when he awoke the morning of February 14, 1996, after a long night of little sleep. Only cigarettes and coffee interested him. He dressed in a blue suit and favorite pair of loafers, pinned a purple button to his lapel, kissed his wife goodbye, and walked alone in bitter cold from the Waldorf-Astoria to The Pierre, a hotel thirteen blocks away. Through his socks, his feet were in contact with the seven lucky pennies he'd found recently on the streets of New York. They gave him some small measure of comfort for the ordeal ahead.

Hassenfeld recognized many of the hundred or so people in The Pierre's Grand Ballroom, a cavernous chamber outfitted with velvet drapes, mirrors and crystal chandeliers below a gold-trimmed ceiling. They were mutual fund managers, institutional investors, and analysts employed by the host of the Eleventh Annual Toy and Video Game Conference, William Blair & Company, a Chicago investment firm.

Some considered Hassenfeld a capable, even exemplary, captain of industry. Others believed he was chairman and chief executive officer of Hasbro Inc., America's 423rd largest public corporation, only because a Hassenfeld had headed the firm since its founding early in the century. They couldn't understand why a man of his stature wore rubber bands as bracelets, and a scarf indoors in winter -- but rarely a necktie or jacket, or even a shirt with a collar. They didn't share his humor, which could be uncommonly silly for a man of forty-seven. And they remained incensed that Hassenfeld and his board three weeks ago had rejected a merger offer from longtime rival Mattel that would have brought shareholders more than $53 for stock that had been languishing near $30. What was wrong with him? He, his sister and his mother, a strong-minded woman who'd been a member of the board for thirteen years, had stood to gain almost $600 million themselves! Not only had he rejected the offer -- in doing so, he had opened Hasbro to a withering attack that, in the darkest moments, seemed certain to destroy it.

What was wrong with him? He, his sister and his mother, a strong-minded woman who'd been a member of the board for thirteen years, had stood to gain almost $600 million themselves!  


The lights dimmed and Hassenfeld took the podium. With his wire-rim glasses and full head of untameable brown hair, he looked as if he could just as easily be lecturing on Faulkner or Twain, two of his favorite authors.

"Good morning," he began, his voice slightly tremulous, but only to someone listening for it. "Today we are here to review our 1995 performance and share with you Hasbro's outlook for 1996 and beyond. For that reason, I will not be talking about the now-ended Mattel proposal."

Looking to the last row, Hassenfeld saw Mattel's two leaders. Chairman and CEO John W. Amerman was a slender man of average height whose white hair, baritone voice and expensive tailoring projected an image of someone considerably larger; at sixty-four, his passions were golf, German shepherds, and Thoroughbred horses. Sitting to his left was Jill E. Barad, forty-four, who had risen to chief operating officer and president largely on her success with Barbie, a doll that promised glamorous fantasy to little girls and handsome bonuses to executives. Worldwide sales of Barbie the previous year had reached $1.4 billion, an extraordinary feat no other toy of any kind had ever accomplished. Amerman and Barad were unusually attentive, for today was the first time this year Hassenfeld had faced the industry's powers. Mattel insiders pictured themselves as sharks, and the agony they'd caused Hasbro over the last month -- the battering punishment that had pushed Hassenfeld and his inner circle to exhaustion, if not the verge of breakdown -- had more than confirmed that reputation. Even if Alan didn't discuss Mattel's spurned offer, Amerman and Barad might learn more clues about the damage they'd inflicted. No telling when they might be tempted to strike again.

Even before launching its stunning takeover attempt, with a fax to Hassenfeld the morning of January 16, precisely two hours after he'd returned from winter vacation, Mattel had become the new darling of the toy industry. Its flagship brands -- Barbie, Fisher-Price, Hot Wheels, and Disney -- were all vigorous, helping the company to end 1995 with its seventh consecutive year of record sales and earnings. No toy company had ever made $358 million, but one had come close. Only two years ago, at this same conference, Hassenfeld had reported the largest revenues and earnings in Hasbro's history. Without gloating, which was not his style, he'd reminded Wall Street that a thousand shares of Hasbro stock purchased for less than $15,000 in 1982 would have been worth almost $1 million twelve years later. He'd joked about his mother's approval of such arithmetic and shown a slide of his greatest philanthropic achievement: a newly opened children's hospital, in his hometown, that bore his company's name.

Two years ago, Mattel had been in second place, a position that vexed its corporate soul.

* * * * * * * * * * * * * *

Unlike his older brother, Stephen, a masterful orator who'd preceded him as chairman and CEO, Alan did not relish public speaking, even to friendly audiences. Financial presentations were his nemesis.

Ordinarily, he relied on humor to get underway, but his advisers had persuaded him this was no time for frivolity. Nor had it been considered wise to begin with one of Hasbro's brilliant television commercials, as he customarily did to lighten the atmosphere at what otherwise was a half day or more of undiluted dreariness. And he would not close with his usual remarks about Hasbro's commitment to social responsibility, which was at the core of his corporate and personal beliefs. Wall Street had wearied of Hassenfeld's causes. Especially in light of the Mattel offer, Wall Street was interested only in earnings and the price of stock -- and how the chairman intended to multiply both. Wearing a purple button with the letters "ESV," for Enhance Shareholder Value, would not suffice. Hassenfeld had to get directly into the numbers -- the area of the business where, he was first to admit, he was least expert.

He began with the fourth quarter of 1995, the first billion-dollar quarter in Hasbro history, and moved on to the full-year results. Hasbro's revenues had risen modestly and earnings, while down, were nothing to be ashamed of: $155 million, or $1.76 a share. Many a private businessman would have uncorked champagne over such numbers, but Wall Street judged Hasbro (like Mattel) by the merciless measure of growth. It was an expectation established by Stephen, and one price to be paid for continuing membership in the Fortune 500.

"While our 1995 full-year results were essentially flat," Alan said, "we have momentum coming into the new year." The games and international divisions, he reported, had had impressive years. Batman and Star Wars toys remained hot and retail sales on many other lines were encouragingly strong. Mr. Potato Head, Hasbro's first hit more than forty years ago, was the surprise star of Toy Story, the Christmas season's box-office smash. All had contributed to Hasbro's strong balance sheet.
  Lucky pennies and all, Hassenfeld was about to faint.

And it was there, in the middle of cash flow and debt, that Hassenfeld's heart started to race and the Grand Ballroom began to go black.

Almost seven years into his chairmanship, Hassenfeld still sometimes felt like an impostor. It was a feeling of wicked wonder, like that experienced by the Tom Hanks character in the movie Big: a boy who one day wakes up an adult in the eyes of the world -- an adult who just so happens to be a major toy-company executive responsible for, and in love with, the design and development of toys. Unpleasureable moments at financial forums were the price to be paid for being "Kid Number One," as Hassenfeld sometimes called himself, but this was different than any discomfort he'd experienced before.

Lucky pennies and all, Hassenfeld was about to faint.

He reached for a glass of water, praying it would sustain him.

* * * * * * * * * * * * * *

He did not faint; his twelve-second pause seemed eternal to him, but went unremarked upon by most everyone else. He drank his water, found his confidence and continued with his presentation, rich with references to global brand-building, the key to Mattel's success and, he now believed, his own company's future. Financials dispensed with, he rolled a dozen of Hasbro's finest new commercials, outlined some of the steps he would take to improve his company's performance, and hinted at even greater changes to come. Hassenfeld closed with a kind of prediction he'd never made: a specific dollar amount for increased profit in the year ahead, offered as a token of his newfound resolve to enrich his stockholders. General applause and a private handshake from Amerman followed. The ugly questions his advisers had prepared him for -- "Alan, if you can't enhance shareholder value, will you step down?" "Alan, how bad is the blood between you and John Amerman?" -- failed to materialize.

"It's done, baby! Behind you!" said Wayne S. Charness, Hasbro's vice president of corporate communications, said as their chauffeur-driven Lincoln Towncar traveled south on Fifth Avenue toward Hasbro's showroom, crowded with buyers this third day of American International Toy Fair, the worldwide industry's largest show. Hassenfeld was in front, legs tucked into his chest, breathing in a Parliament cigarette, oblivious of anything but the remembrance of his presentation. Charness adjusted the seat to give his boss more room.

"With the adrenaline pumping the way it was at the beginning, I was almost over-ready," Hassenfeld said. "I think that's why I went blind for a minute."

"It was beautiful," Charness said.

"You wouldn't say anything different."

"I tell you when you stink." Charness assured him that no one in the audience knew what had happened in those twelve dark seconds.

"I was really, really scared," Hassenfeld said.

"It's over," Charness said, but his reference was only to that morning. For new pressures awaited Hassenfeld as he neared the Hasbro showroom, on West Twenty-third Street. His board would meet the next day and directors were ornery. They'd been put on the defensive for rejecting Mattel's offer -- Fifty-three dollars a share, they kept hearing, are you crazy? -- and if Mattel had truly given up, as some doubted, other sharks could be circling. No one was pleased with last year's dismal performance in Hasbro's domestic-toys division, headed by Hassenfeld's oldest business friend, Alfred J. Verrecchia, a man whose prodigious financial and administrative skills had helped propel Hasbro to the top. Relations with Toys "R" Us, Hasbro's biggest customer, were badly strained since Hassenfeld had inadvertently disclosed information during the Mattel affair that had led The Wall Street Journal to report the giant chain was the subject of a federal investigation.

And it was all well and good to promise great things for 1996, quite another to deliver. Having failed on earlier promises of improved performance, Hassenfeld had a credibility problem. Taken together, the stress was not unlike seven years ago, when cruel fate had handed him the chairmanship of what was then the largest toy company the world had ever seen.

The first smile of the day crossed his face when he was asked what he'd dreamed last night... "It was weird," Hassenfeld said, deadpan. "Barbie was raping G.I. Joe."  


Still, as his Towncar turned onto West Twenty-third, Hassenfeld was starting to relax. Toy Fair had always been his time -- a week of hosting celebrities, showing off the latest toys, dining with family and friends, and otherwise being Kid Number One. Hassenfeld genuinely enjoyed people. He enjoyed pleasing them, feeding them, telling them stories, making them laugh.

The first smile of the day crossed his face when he was asked what he'd dreamed last night. In 1994 he'd seen, of course, Jill Barad posed with pillows and three dozen Barbie dolls on a red satin sheet when People Magazine named her one of that year's "50 Most Beautiful People." And he'd seen her on the cover of this week's Brandweek, a marketing magazine, with the headline: G.I. JOE'S WORST NIGHTMARE. Joe, Hasbro's most famous toy and one of Hassenfeld's sentimental favorites, had ended 1995 below $15 million in sales, a pitiful performance.

"It was weird," Hassenfeld said, deadpan, about his dream. "Barbie was raping G.I. Joe." It was uncharacteristically crude of Hassenfeld, and as he stepped into the cold, he hastened to add: "Just kidding!" Then he ran across the street and disappeared into the fabulous showroom -- a palace, really -- that his late brother had built.

-- Use of this excerpt from Toy Wars by G. Wayne Miller may be made only for purposes of reviewing or promoting the book, with no changes, editing or additions whatsoever and must be accompanied by the following copyright notice: Copyright © 1998 and 1999, renewed in 2019, by G. Wayne Miller.


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