Nelson Peltz, an activist investor who runs hedge fund Trian Partners, believes urgent change is needed at Disney. He is waging a proxy fight to install himself and former Disney CFO Jay Rasulo as directors, a vote that will be up at Disney’s 2024 annual shareholder meeting on April 3.
What does Trian want? “Basically and crudely, we want the stock to go up,” Peltz says in a video on TrianDisney’s proxy fight website.
Well, so far in February, Disney shares are up 16.2% — increasing the value of the shares Trian controls by about $500 million. As of Friday’s closing price, the 32.3 million shares of Disney stock that Trian beneficially owns (79% of which are owned by former Marvel Entertainment CEO Ike Perlmutter) are worth $3.6 billion.
What’s got investors rallying around Disney stock: Its Feb. 7 earnings report for the December 2023 quarter showed improvements in cost cuts, including in its streaming business. CEO Bob Iger has touted a series of new initiatives, including Disney’s joint venture with Fox and Warner Bros. Discovery to create a sports-centric streaming package, plans to launch a standalone streaming version of ESPN as early as August 2025 and a $1.5 billion strategic investment in Fortnite maker Epic Games. He also revealed a surprise November 2024 premiere date for the animated film “Moana 2,” and revealed an exclusive deal for the concert film of Taylor Swift’s Eras Tour to stream on Disney+ (with five additional songs).
Iger said in his announcement that Disney has “turned the corner and entered a new era for our company, with a focus on future-proofing ESPN, building streaming into a profitable growth business, revitalizing our film studios, and fueling growth in our parks and experiences.” Profits.
But Peltz is not backing down from his fight with Iger and the current Disney board.
Trian dismissed the Mouse House ads as a “spaghetti against the wall” plan. In a letter dated February 12, the hedge fund said, among other things, that Epic Games’ investment “lacks a product roadmap or expected return targets” and that the sports streaming venture with Fox and WBD “will likely confuse consumers, surprise important content partners and cause “. “Competes with the company’s own services.”
“Technology activism, in the face of proxy competition, is no substitute for a well-thought-out corporate strategy,” Trian said in the letter. “And throwing spaghetti at the wall will not feed shareholders who have been hungry for returns for too long. Disney shareholders need the company to consistently perform under the watchful eye of an attentive board.”
Trian also noted that the Disney board “has not yet identified a successor to Mr. Iger.” At the New York Times’ DealBook Summit in November, Iger — whose renewed contract runs through the end of 2026 — asserted that “Disney’s succession process is robust right now” and “we are aggressively pursuing succession.”
Trian even included a cartoon depicting Disney board members throwing spaghetti (and meatballs) at the wall of a company boardroom:
Disney issued its own letter to shareholders on February 12, which it posted on its proxy voting campaign website (votedisney.com).
“The Board of Directors and management team remain committed to driving meaningful growth and creating sustainable shareholder value long into the future,” Disney’s letter, summarizing Iger’s earnings day announcements, said. “Despite these efforts, both activist hedge funds, Trian Fund Management, LP and Blackwells Capital, are seeking to replace directors with their own separate nominees, none of whom the Board believes possesses the appropriate range of talent, skill and perspective. And/ Or the experience to effectively support Disney’s building priorities in the face of ongoing industry-wide challenges.
In an interview with CNBC on February 14, Peltz commented that Iger’s “statements” about new initiatives “remind me of a politician making Election Day announcements versus State of the Union addresses. State of the Union is what I want to hear about, not Election Day promises.” “.
Meanwhile, upon announcing the earnings, Disney announced that its board of directors had approved a new stock buyback program effective February 7, 2024, with plans to target $3 billion in buybacks in fiscal 2024. The board also announced a cash dividend Due July 2024 45 shares. cents per share, up 50% from the dividend paid in January — which was the first dividend in more than three years, after Disney suspended dividends during the Covid pandemic.
Peltz, in a Valentine’s Day interview on CNBC, questioned whether Disney could really “afford” to continue paying dividends and buying back stock. “The balance sheet has been really hurt,” he said. Peltz also said Trian would release a white paper, which it promised would be a deep dive with guiding proposals on how Disney can improve its long-term financial performance, within “a couple of weeks.”
“Everybody better sit down with a nice, warm cup of milk and get comfortable, because you’re going to be watching chapter and verse about Disney,” Peltz said.
Incidentally, Peltz has no dispute with Swift’s Eras Tour’s Disney+ deal, which is said to be worth more than $75 million. “A real fan. I love it,” Peltz told CNBC. “True. I can’t argue with that.”