Investor Nelson Peltz’s broadside for Walt Disney Co. and the prospect of a rare proxy battle at the media giant have stunned the media world this week — and a slew of SEC filings over the past few days. The spate suggests that more fireworks are coming.
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Already on tenterhook about how returning CEO Bob Iger will right the ship after activist investors claim a seat on the company’s board and spark criticism of management Wall Street’s attention is on.The high-profile executive Encore Run as Disney’s chief executive has already faced a series of challenges, some industry-wide and others self-harm.
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Mr. Peltz may not be a household name, at least in the entertainment world, but he could play an important role in the company’s direction. If only I could persuade other shareholders to vote him on the board.
Activists tend to be brash, outspoken street veterans. Perhaps the most famous in the media world is Carl Icahn, who has been tangled up with Time Warner and Lionsgate. Thirdpoint hedge fund chief Daniel Loeb has been accused by George Clooney of clashing with Sony and most recently provided former Disney CEO Bob Chapek with a list of demands, including spinning off ESPN. After that, I finally withdrew. Elliott Management has been known to personally complain and demand the ouster of AT&T chief John Stankey and his former boss Randall Stevenson.
By comparison, Peltz’s aims are simpler, claiming to favor current management. He and his investment firm, Trian Partners, have no objections to Iger’s role as CEO or the company’s current structure. Rather, given their strong asset mix, they lament their stumbling blocks and believe they offer “new perspectives to improve performance.”
Trian released the first salvo on Wednesday in a synopsis called “Restore The Magic,” in which Peltz ran for a seat on Disney’s board of directors and opposed the company’s proposed board of directors, which included new board chairman Mark Parker. Shareholders vote for directors at the annual general meeting, which is usually held in March. Trian has since released a series of follow-up information. This included recording his decks of slides and overtures, and meetings with various Disney personnel. As this is closely related to Disney’s governance as a public company, the communiqué will be filed with his SEC. Trian also introduces investors to RestoreTheMagic.com, his continuously updated website dedicated to efforts to turn Disney around. In a filing Friday, the company said it had received “many inquiries and expressions of support from shareholders.”
Disney has yet to release its proxy filings for its latest fiscal year, which ended in September. It sets the date for the annual general meeting and lists the company’s directors, opposition candidates and other proposals for voting. Internal and external shareholder proposals, few for Trianon. It should be pretty eventful. Last year, his CEO at the time, Bob Chapek, spoke out for the first time against Florida’s so-called “Don’t Say Gay” bill, which was signed days later.
Apart from Trian, Iger still faces many challenges and changes. Chapek said he was abruptly ousted in November and succession disputes are ongoing. Eiger signed a two-year deal. The company also welcomes Parker, who is also Nike’s executive chairman, as its new chairman. According to Disney, he will replace Susan Arnold as he reaches a record 15 years as a member of the board.
Trian seems to be yelling out the quiet parts. In an interview with CNBC, Peltz likened Disney to the Chinese Communist Party, saying that the $71.3 billion acquisition of most of 21st Century Fox in 2019 left the company “in a pinch” financially, leaving 57 years of hope behind. He said he helped to wipe out the dividend that was being paid. It is owned by many of the company’s private investors. Disney (and others) scrapped dividends to save cash during the pandemic and have yet to resume it.
Just before Christmas, Eiger called Peltz and said a virtual meeting was scheduled, but could be held by January 6 “due to Mr. Iger’s plans to sail a yacht off the coast of New Zealand”. was reported to be low.
A spicy passage in one SEC filing details the complete timeline from Trian’s perspective. Peltz spoke with Chapek, who was still his CEO, last summer when he began criticizing the company and revealed his desire to sit on the board, according to the filing. Over the next few months, the conversation was complicated by Chapek’s dismissal and the looming deadline to put new directors on the ballot ahead of a shareholder vote. Just before Christmas, Eiger called Peltz and said a virtual meeting was scheduled, but could be held by January 6 “due to Mr. Iger’s plans to sail a yacht off the coast of New Zealand”. was reported to be low.
Finally last week’s meeting was put on the books.
The Disney episode follows a familiar playbook from Peltz, whose board activity has attracted considerable attention in the financial world since Trian’s founding in 2005. He is currently Non-Executive Chairman of The Wendy’s Corp. and serves on the boards of Unilever and Madison Square. Garden Sports Corporation, the parent company of the New York Knicks and Rangers. The Brooklyn-born Peltz, 80, is a hockey fan and friend of MSG chief James Dolan, and is personally invested in MSG. Previous boards included Procter & Gamble, HJ Heinz and Sysco. Consumer products, not media, have generally been Peltz’s wheelhouse.
Trian owns nearly $1 billion in shares in Disney, but given the size of the media company, that position means only about half of 1%. A lack of social media experience puts some Wall Street folks off, but Trian’s counterargument is that they want just one board seat, and Peltz’s consumer experience isn’t Disney’s. It’s comparable to a sizable footprint in theme parks and merchandise.
Disney shares, which have hit eight-year lows in recent weeks and significantly underperformed the S&P 500 and many media peers, initially responded well to Mr. Peltz stirring the pot, falling more than 3% on Thursday. rose. However, he closed at $99.40 on Friday, down just one point.
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Given the uncertainty of the theatrical film business, the negative momentum of the pay-TV business, and other headwinds, Iger had already cut his work short. He acted quickly to undo some of his Chapek moves, but he’s also the one who put Chapek in charge in the first place. It’s a decision that many observers both inside and outside of Burbank have yet to agree with Iger’s storied run as CEO from 2006 to 2020.
Wall Street analyst Michael Nathanson, who maintains a Buy rating on Disney stock, wrote a memo to clients on Thursday expressing support for Mr. Peltz’s intervention, suggesting that Mr. I hope to be allowed to do so.
“While I believe Trian is correct in identifying these issues, I believe the company will soon move towards improved profitability given the change in leadership,” he wrote.
“In our view, Disney’s poor performance against the S&P 500 is driven by macro concerns (such as slowing consumer spending and slowing advertising), the pandemic impact of park closures, accelerating cord cuts and box office revenue declines. A combination of post-pandemic structural headwinds such as declines, some of which include the acquisition of 21st Century Fox, and an increase in Disney+ TAMs. [total available market] In late 2020 (which has forced the company to invest further in its broader content offering), the decision to continue to strengthen cricket rights in India and minor sports on ESPN.
Nathanson declared that he was overall “optimistic” that Iger would make “difficult decisions consistent with Trian’s objectives”. It will be higher than below.”
Disney has not faced such shareholder objections since the early 2000s. Former Walt Disney directors Roy E. Disney and Stanley Gold fought a bitter battle to oust then-CEO Michael Eisner at the 2004 annual meeting. Shareholders at that meeting cast a shocking 45% no-confidence vote against Eisner, who was stripped of his title as chairman. Disney and Gold also threatened to hold a proxy contest to elect an opposition board member at the next annual meeting, but backed down.Iger, an ABC and Disney enthusiast, eventually made a ruckus. and became CEO of the company.
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