Disney’s Proxy War with Activist Investors: A fight for the future at the House of Mouse

Peltz is a legendary activist investor. His Trian Fund Management owns roughly $3 billion worth of Disney stock.

Therein lies the puzzle. Cost-cutting hiccups aside, Disney shares are up 16.2% so far this year — which has increased the value of the shares Trian Partners controls by about $500 million.

So what does Peltz want besides more board control?

“Fundamentally and crudely, we want the stock to go up,” Peltz says in a video on Trian’s Disney proxy-fight site.

He has criticized Disney CEO Bob Iger’s strategy for turning Disney around, saying it’s having the reverse effect. Disney’s challenges are raising questions about some of Iger’s past decisions, like the 2019 purchase of television and film assets from 21st Century Fox, which cost a decade’s worth of free cash flow, Peltz has noted.

His activist strategy is both sweeping and sophisticated. Trian’s proxy-fight website backs up all its claims with charts, graphs and hard financial data, as well as quotes from executives at companies like DuPont, which Peltz helped turn around.

Disney has said the company is better off with Iger at the helm.

Meanwhile, activist investor Blackwells Capital has urged Disney to elect its three board candidates, arguing they would help drive growth, review real estate holdings and bring technology expertise.

Its nominees could help Disney “explore all strategic possibilities with cold eyes” including a potential separation of the company into three entities that could eventually become standalone public companies, it said in a letter to Disney shareholders.

The fight may be resolved at an April 3 stockholder meeting when Disney shareholders will, under new rules, have the option of choosing from the company’s 12 nominees, Blackwells’ three nominees and from the two put forward by Peltz’s Trian Fund Management.

Blackwells wants to expand the board, while Trian remains concerned about succession planning and wants its nominees to replace Disney directors.

Blackwells said it supports CEO Iger and the changes he is making, but that even Iger “requires oversight and accountability.”

Disney is urging shareholders to re-elect its directors and not vote for the Trian or Blackwells candidates.

“Trian-Blackwells-Disney is quite the spectacle,” said Michael R. Levin, founder of The Activist Investor. “I would have given Nelson a decent chance of winning at least one of the two (board) seats, but a couple of things happened: Blackwells decided to muck things up quite seriously, for reasons that no one can quite discern. And, Disney responded well to the challenge of activist investors, as it did at this time in 2023 when Trian first attempted this.”

Levin said he believes shareholders are or will be relatively happy, if not satisfied, with the share price bump from Disney’s recent strategic and business announcements.

“It doesn’t matter whether they make the most sense, or if they’re better or worse than what Trian wants to do,” Levin added. “Whether shareholders like what they see matters most here.”

Blackwells really disrupted the situation, Levin added. Shareholders would have had a relatively straightforward choice between two Trian nominees and two Disney incumbents.

“Now, they can choose from among 17 people for 12 seats. Given the recent Disney announcements and share price reaction to those announcements, it seems likely that most shareholders will avoid the confusion of picking from among those 17 and just go with the 12 incumbent directors.”

Levin said he does believe Trian has the best interest of Disney shareholders in mind.

“He principally wants share price appreciation – he doesn’t need another board seat for his resume, and certainly doesn’t need the time commitment and hassle of serving on the Disney board.”

Levin is among the featured speakers on March 21 at the Activist Investor Conference, to be held in New York City at 237 Park Avenue, which has been called the “venue of the future.”

The Disney-Trian-Blackwells proxy battle is a modern case study in how major corporations and activist investors confront each other on opposite sides of the chess board.

For instance, Peltz initially pushed for as many as four directors, later cutting back to two. This decision followed Disney’s countermove by revamping its bylaws, and after the company announced it was adding two new directors.

“I’m less worried about the distraction (of a proxy war) and more worried about how complicated this all is,” LightShed Partners media analyst Rich Greenfield told Reuters. “There are so many issues, all at once, all while doing the largest cost-cutting in the company’s history.”

Trian continues to argue 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.”

In a statement, Disney said “its diverse and highly qualified board” is focused on the company’s long-term performance, strategic growth initiatives including the ongoing transformation of Disney businesses, increasing shareholder value, and finding a successor to Iger.

The company often points out that Trian is in partnership with Isaac Perlmutter, a longtime executive with Disney subsidiary Marvel Entertainment who was ousted almost a year ago.

Peltz remains undaunted.

In an interview with CNBC last week, Peltz commented that Iger’s “pronouncements” about new initiatives “reminds me of a politician making election-day announcements versus State of the Union speeches. State of the Union is what I want to hear about, not election-day promises.”

As it concerns the Disney board of directors, election day is less than two months away.

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