Disney and Activist Investor Peltz Prepare for Board Seat Battle: Following Walt Disney Co’s denial of activist investor Nelson Peltz a seat on its board, the billionaire and the home of Mickey Mouse are engaged in a boardroom duel. After criticizing Disney for failing to properly plan for its succession, overspending on 21st Century Fox, and giving its CEO “over-the-top” compensation packages, Peltz, who co-founded Trian Fund Management, petitioned to join the board.
In a presentation on Wednesday, Peltz’s company referred to Disney as “a company in crisis” and demanded that it cut costs and start turning a profit at its Disney+ streaming service, which has been losing money even as it grows. Disney’s shares have fallen 39% in the last 52 weeks and are trading at an 8-year low.
According to Trian, many of Disney’s issues are “self-inflicted and need to be addressed,” and he demanded accountability for capital expenditures and the restoration of the company’s dividend by fiscal 2025. Peltz did not provide a comprehensive plan for attaining his objectives at a time when Disney CEO Bob Iger is already addressing many of the issues facing the firm.
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According to those with knowledge of Disney, Peltz has merely voiced objections without suggesting any potential remedies. A boardroom conflict is anticipated between Iger, who has long been quite well-liked in Hollywood, and activist Peltz, who is respected particularly for his work at consumer companies.
Peltz asserts that he does not wish to succeed in Iger.
This is only Trian’s fourth proxy battle, and the investor typically views himself as a partner to management. Investors will decide later this year whether Peltz should serve on the Disney board if the two sides do not reach a settlement first.
Peltz has gained access to the board and management of Disney, which recalled Iger from retirement for the top job in November. However, it denied his request to join the board in part because of his lack of media and technological knowledge, according to persons with knowledge of the situation on Wednesday.
Iger has committed to concentrating on cost reduction and profitability at the entertainment conglomerate, which has holdings in everything from theme parks and streaming to television and movie studios. Disney previously stated that it anticipates the streaming industry to become profitable by 2024.
Iger, who served as Disney’s CEO from 2005 to 2020, has decided to continue in that role for another two years while the business looks for a permanent leader.
Disney Shares Up
Trian, which holds 9.4 million Disney shares worth approximately $900 million, or roughly 0.5% of the company, expects to officially nominate Peltz for director in filings it plans to file with the Securities and Exchange Commission on Thursday.
Companies, where Peltz served on the board, have reported higher returns than the overall S&P 500 stock index, according to the business, which has previously pushed for reforms at Unilever, P&G, and Mondelez, among others.
Disney recently offered Peltz a position as a board observer but required him to sign a standstill agreement, which Peltz declined to do, according to a source familiar with Trian’s actions, in an effort to prevent a proxy battle.
On hearing that an activist investor is becoming engaged, a company’s shares frequently increase. Shares of Disney, which has a $176 billion market cap, increased 1.6% on Wednesday in extended trading.
Whether Peltz prevails in his legal battle or not, Disney’s management appears to have become more aggressive in executing changes and fine-tuning their approach as a result of Peltz’s action, according to Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.
“I’m going to get some popcorn and watch this program,” said Schulman. This is the second time in the past six months that an activist shareholder has requested reforms for Disney. Daniel Loeb of Third Point pushed the business to spin off ESPN, repurchase shares, and replace its board.
According to those with knowledge of the discussions with Loeb, the multibillionaire investor listened attentively and was receptive to the discussion, and the two parties soon decided to add former media executive Carolyn Everson to the board.
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Susan Arnold, who will not run for re-election, will be replaced as chairman by Mark Parker, an independent director and the executive chairman of Nike Inc. Additionally, Parker will serve as chair of a recently established committee that will assist the board on CEO succession planning.
(Reporting by Svea Herbst-Bayliss in New York; editing by Krishna Chandra Eluri, Devika Syamnath, David Gregorio, Leslie Adler, and Himani Sarkar in Bengaluru; writing by Uday Sampath and Yuvraj Malik in Bengaluru; and writing by Sayantani Ghosh in Walnut Creek, California) Please note that this report was automatically created by the Reuters news agency. ThePrint disclaims all liability for its contents.