UPDATED with Disney response to Trian threat: Disney has responded to activist investor Nelson Peltz’ plan to go directly to shareholders to seek a seat on the board, which the company denied him, saying a vendetta by his ally Isaac Permlutter may be distorting an agenda that’s not in line with the broader Disney shareholder base.
The Trian founder is “in partnership with Isaac Perlmutter, a former Disney executive…Mr. Perlmutter owns 78% of the shares that Mr. Peltz claims beneficial ownership of, or more than 25 million of the 33 million shares. 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.”
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In other words, Perlmutter is allowing Peltz to vote his shares to boost Trian’s firepower in an eventual proxy battle.
Trian took on Disney and Iger last year for board seats with Perlmutter on the margins, but retreated before an actual proxy battle as Iger announced a series of changes at the company since he returned as CEO just over a year ago. He’s been following though on many although the stock is still lagging.
“Disney is moving from a period of fixing to a new era of building, as the entire media sector navigates the crosscurrents of the competitive landscape for streaming. We are executing on four key building opportunities that will be central to our success: achieving significant and sustained profitability in our streaming business; building ESPN into the preeminent digital sports platform; improving the output and economics of our film studios; and turbocharging growth in our Experiences business,” the company said. He laid all this out yesterday, and at a staff Town Hal Meeting the day before.
“The Board and management are steadfast in our commitment to ensuring The Walt Disney Company’s long-term success for the benefit of all our shareholders.”
Iger hit on all these points during a conference Q&A yesterday. Asked by NYT DealBook’s Andrew Ross Sorkin if he thinks it’s personal” He said, “This is not a headline that I’m going to create right now.” The company waited a day, until Peltz’ salvo, to say they think it is.
“There’s a qualification level that is required to sit on the Disney board. And the board makes decisions about who’s qualified and who isn’t qualified to be on the board. And if Nelson officially requests the board seat, I’m sure the board will go through a process to determine whether he is whether he should have a role on the board or not. But it’s not like we’ve got a number of empty seats — ‘Come on in join the Disney board. Have fun’,” he added.
The board did decide against Peltz and the activist investor was clearly unhappy he was refused a seat even as Disney named two new directors yesterday.
Iger also said he’s asked the board to try to keep out of the stew as much as possible — “Don’t force me to take my eye off the ball and lose focus in terms of managing the company.”
PREVIOUSLY: Nelson Peltz’ Trian Fund Management, which owns about $3 billion of stock in Disney, said today it plans to take its case for change at the media giant directly to shareholders after the company rejected its request for a board seat.
“This morning, following conversations with Disney’s CEO, Disney extended an offer to Trian to meet with the Board but informed Trian that the Board is turning down Trian’s recent request for Board representation, including Nelson Peltz,” Trian said in a statement today.
So the activist billionaire is very much in Disney’s hair right now, for the second time. Trian pushed for board seats earlier this year in aggressive campaign but Peltz withdrew after Iger announced sweeping changes.
“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.”
Disney name the two new directors yesterday.
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