Disney set for battle with Peltz after rejecting request for board place

Source: Disney

Disney is girding itself for a fight over the composition of its board after activist investor Nelson Peltz said he would take his case direct to shareholders following a rejection of his move to secure a place on the studio’s board.

Disney has moved to change bylaws governing nominations to the board and has announced a dividend for the first time in three years as it seeks to secure shareholder support ahead of the forthcoming battle with Peltz’s Trian Partners.

Trian said yesterday that following discussions with Disney, the studio had rejected the investor’s request for board representation, including a place for Peltz.

Peltz had pulled back from an earlier attempt to secure a place on the board in February after Disney announced its restructuring plans, but has now resumed his assault.

“Since we gave Disney the opportunity to prove it could ‘right the ship’ last February, up to our re-engagement weeks ago, shareholders lost $70 billion of value. Disney’s share price has underperformed proxy peers and the broader market over every relevant period during the last decade and over the tenure of each incumbent director. Investor confidence is low, key strategic questions loom, and even Disney’s CEO is acknowledging that the Company’s challenges are greater than previously believed. While James Gorman and Sir Jeremy Darroch represent an improvement from the status quo, the addition of these directors will not, in our view, restore investor confidence or address the root cause behind the significant value destruction and missteps that this Board has overseen. Trian intends to take our case for change directly to shareholders,” said Trian, referring to Disney’s announcement that Morgan Stanley chair Gorman and former Sky Group CEO Darroch would be joining the board.

Disney responded by highlighting Peltz’s alliance with Isaac Perlmutter, the former Marvel chief fired by Disney earlier this year, who owns 78% of the shares over which Peltz claims beneficial ownership.

“This dynamic is relevant to assessing Mr. Peltz and any other nominees he may put forth as directors, as Mr. Perlmutter was terminated from his employment by Disney earlier this year and has voiced his longstanding personal agenda against Disney’s CEO, Robert A. Iger, which may be different than that of all other shareholders,” said Disney.

From fixing to building

Defending Iger’s record, the studio said that it had restructured the company to “restore creativity to the centre of all our businesses” and that it was on tract to achieve US$7.5 billion in cost savings, or US$2 billion more than its original target.

It said it was now focused on “moving from a period of fixing to a new era of building” based around the for key strategies of achieving sustainable profitability for the streaming business, building ESPN into a global digital sports platform, improving the output of the film studios and growing its experiences business.

It reiterated that it expects free cash-flow to approach pre-COVID levels in fiscal 2024.

Disney has amended bylaws governing the nomination of directors by shareholders, requiring disclosure of additional background information and, in line with SEC Rule 14a-19, new rules around formatting and presentation of proxy cards, as well as a rule that requires shareholders nominating their own director candidates to solicit holders of two thirds of the voting power of shares entitled to vote in the election.

In move that could sweeten investor sentiment, Disney also announced a cash dividend of US$0,30 per share for the second half of fiscal 2023, payable in January.