Walt Disney is bracing for a bitter proxy battle as activist investor Nelson Peltz nominated himself and an ally to Disney’s board. This is Peltz second attempt this year to gain sway over Disney’s strategy. The looming battle comes at a pivotal time for Disney, as the company is trying to reinvigorate its creative franchises, make its streaming business profitable and find partners to help build ESPN’s digital future.
Nelson Peltz on Disney board
Peltz’s Trian Fund Management, which owns roughly $3 billion worth of Disney shares, abandoned a bid for one board seat in February when the media conglomerate outlined a sweeping restructuring plan that addressed his criticisms.
Trian nominated Peltz and former Disney Chief Financial Officer James “Jay” Rasulo on Thursday.
“As Disney’s largest active shareholder, we can no longer sit idly by as the incumbent directors and their hand-picked replacements stand in the way of necessary change,” Trian said in a statement, laying out the case for its two independent director candidates.
Disney largest shareholder
After having signaling that he might nominate as many as four directors, Peltz cut the number to two. The decision came after Disney revamped its bylaws and after the company announced it was adding two new directors.
“Disney is one of the most iconic companies in the world, with unrivaled scale, unparalleled customer loyalty, irreplaceable intellectual property, and enviable commercial flywheel,” Trian said in a statement issued Thursday. “However, Disney has woefully underperformed its peers and its potential.”
“I’m less worried about the distraction (of a proxy war) and more worried about how complicated this all is,” said LightShed Partners media analyst Rich Greenfield. “There are so many issues, all at once, all while doing the largest cost-cutting in the company’s history.”
One former Disney executive who worked with Rasulo described him as a financially savvy operator who could nonetheless be hard-nosed and sarcastic, whose leadership style was a contrast to the affable, polished Iger.
Why Nelson Peltz wants in on Disney board?
Together, Peltz and Rasulo are positioning themselves to other investors as the people the company needs now to cut costs, lay out a sensible succession plan and revamp the company’s streaming operations.
Trian criticized Disney’s financial performance, noting its per-share earnings in the most recent fiscal year are lower than a decade ago. Margins on the company’s streaming business and its media operations lag peers, Trian argues. And movie releases continue to underperform expectations.
“For shareholders, this subpar performance has destroyed value,” Trian wrote.
Trian argues that Disney’s non-management directors collectively own less than $15 million of Disney stock, and Iger also sold the majority of his ownership stake, suggesting the board and CEO “have no conviction that things will get better.”
Peltz’s fund argues that the “root cause of Disney’s underperformance” is that the board is too closely aligned with Iger and lacks “focus, alignment and accountability.”
Disney on transformation
Disney issued a statement, saying its diverse and highly qualified board is focused on the long-term performance of the company, strategic growth initiatives including the company’s ongoing transformation of its businesses, increasing shareholder value, and finding a successor to Iger.
The company notes Trian is in partnership with Isaac Perlmutter, a longtime Marvel Entertainment executive who was ousted in March.
Over the past 12 months, Disney has restructured the company and significantly reduced costs. It told investors last month it is on track to achieve about $7.5 billion in cost savings – $2 billion more than its original target.
Trian said that since it gave Disney the time “to prove it could right the ship” in February, up to its re-engagement weeks ago, shareholders lost about $70 billion of value.
Disney had announced the appointment of James Gorman, chair and chief executive of Morgan Stanley, and Jeremy Darroch, a veteran media executive and former group chief executive of Sky, as new directors last month.
Disney’s stock price
Disney’s stock price rose 1.1% to $93.94 on Thursday. The share are up 8% in 2023; the broad-market S&P 500 has gained more than 20% in that time.
