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Disney Faces Intense Proxy Battle as Nelson Peltz Seeks Board Seats
Edited by: TJVNews.com
The Walt Disney Company is bracing for a significant proxy battle as activist investor Nelson Peltz, through his firm Trian Fund Management, seeks to secure two board seats. As was reported by the New York Post, this move marks Peltz’s second attempt at challenging Disney’s board this year, following the abandonment of an earlier bid for a single board seat in February. The Post report also said that the proxy battle comes amid Trian’s concerns about Disney’s underperformance and its call for necessary changes within the media conglomerate.
Trian Fund Management, holding approximately $3 billion worth of Disney shares, has been a vocal advocate for change within the company. According to the Post report, in February, Trian withdrew its initial bid for a board seat after Disney outlined a comprehensive restructuring plan addressing some of Peltz’s criticisms. However, dissatisfied with the pace of change, Trian is now pushing for a more significant influence on Disney’s board.
Trian’s latest move involves the nomination of Nelson Peltz and former Disney Chief Financial Officer James “Jay” Rasulo for two board seats. As was indicated in the Post report, Peltz, a seasoned activist investor, and Rasulo, a veteran theme park executive with prior CFO experience at Disney, are positioning themselves as catalysts for necessary changes, emphasizing cost-cutting, succession planning, and a revamp of Disney’s streaming operations.
Initially signaling a potential nomination of up to four directors, Peltz decided to narrow the number to two, the report in the Post said. This decision followed Disney’s restructuring of its bylaws and the addition of two new directors by the company.
Trian has laid out its case for change, criticizing Disney’s financial performance. The firm points out that Disney’s per-share earnings in the most recent fiscal year are lower than a decade ago, highlighting a decade-long stagnation, the Post reported. Trian also raises concerns about the company’s streaming business and media operations, citing lagging margins compared to peers. Furthermore, Trian argues that Disney’s movie releases continue to underperform expectations, resulting in subpar performance and the destruction of shareholder value.
In a statement issued on Thursday, Trian acknowledged Disney’s iconic status but argued that the company has “woefully underperformed its peers and its potential.” According to the report in the Post, Peltz and Rasulo aim to position themselves as leaders capable of steering Disney through cost-cutting measures, a sensible succession plan, and a strategic overhaul of the company’s streaming endeavors.
Peltz asserts that the Disney board’s limited ownership stakes, combined with Iger’s divestment, signal a lack of confidence in the company’s prospects, the Post report said. The fund points to this as the “root cause” of Disney’s underperformance. According to Trian, the board’s close alignment with Iger has resulted in a lack of focus and accountability.
Disney responded to Trian’s allegations, emphasizing that its board is both diverse and highly qualified, dedicated to the company’s long-term performance, strategic growth initiatives, and increasing shareholder value, as was noted in the Post report. The company’s statement defended its ongoing transformation efforts, cost reduction measures, and ambitious plans for the future. Disney also highlighted Trian’s association with Isaac Perlmutter, a former Marvel Entertainment executive who was ousted in March, the Post report added.
Over the past 12 months, Disney has undergone a significant corporate restructuring, focusing on cost reduction measures. The company aims to achieve approximately $7.5 billion in cost savings, exceeding its initial target by $2 billion. As was reported by the Post, these efforts align with Disney’s commitment to making its streaming business profitable, elevating ESPN into a premier digital sports brand, improving film studio performance, and investing $60 billion over the next decade to stimulate growth at its theme parks.
Trian argues that, since February when it initially withdrew its board seat bid to give Disney time to demonstrate a turnaround, shareholders have lost approximately $70 billion in value, the Post reported. The fund contends that this loss underscores the need for a reevaluation of the company’s leadership and strategic direction.
In response to mounting pressure, Disney 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, as was said in the Post report. These appointments were part of Disney’s efforts to strengthen its board and address concerns raised by activists like Trian.
The clash between Trian Fund Management and Disney underscores the challenges faced by one of the world’s most iconic entertainment companies. As both sides present their cases, the outcome will not only shape the future leadership structure of Disney but also influence the company’s strategic direction and its ability to navigate a rapidly evolving entertainment landscape. Shareholders and industry observers will be closely watching as the battle for Disney’s future unfolds.
