Disney Proxy Battle: Who is Nelson Peltz and why does he want to be let into the magic kingdom?

The investor Nelson Peltz’s wide side against The Walt Disney Co. and the prospect of rare proxy fights at the media giant have stunned media circles this week – and a flurry of SEC filings in recent days suggests there are plenty of fireworks to come.

The activist investor’s demand for a seat on the company’s board and criticism of management have drawn the full attention of a Wall Street already tense about how returning CEO Bob Iger will save the ship. Adding the famous executive as head of Disney already faces a number of challenges, some industry-wide, some self-inflicted.

Peltz may not be a household name, at least not in the entertainment world, but he could play an important role in the company’s direction — especially if he manages to convince other shareholders to elect him to the board .

Activists are typically brash, outspoken veterans of the streets. Perhaps the most famous in media circles is Carl Icahn, who took on Time Warner and Lionsgate. Third Point hedge fund chief Daniel Loeb came under fire from George Clooney during a clash with Sony and recently provided former Disney CEO Bob Chapek with a list of demands, including the spinoff of ESPN, before eventually backing down has. Elliot Management is known for getting personal, calling for the impeachment of AT&T CEO John Stankey and his former boss Randall Stephenson, at the top of a list of grievances.

In comparison, Peltz’s goals are simpler and he claims to support current management. He and his investment firm Trian Partners do not dispute Iger’s CEO role or the company’s current setup. On the contrary, they lament the obstacles in the face of the powerful wealth mix and see themselves as a “new perspective on performance improvement”.

On Wednesday, Trian fired his first salvo in a synopsis titled “Restore The Magic,” announcing that Peltz would run for a seat on Disney’s board and opposing the company’s proposed slate of directors that also included the new CEO Mark Parker is owned. Shareholders vote on directors at the annual meeting, which is usually held in March. Trian has since released a series of follow-up information, including a slide show and chronicles of the overtures and meetings with various Disney representatives. Because it is relevant to Disney’s corporate governance as a public company, the communiqués will be filed with the SEC. Trian also pointed investors to a constantly updated website dedicated to efforts to transform Disney, RestoreTheMagic.com. In a filing Friday, it said it had “received numerous questions and statements of support from shareholders.”

Disney has not yet released its proxy statement for the most recent fiscal year ended September. There it would set the date for the annual meeting and create its own list of directors and opposition candidates and other proposals to vote on — its own proposals and proposals from outside shareholders, of which Trianon has few. It should be quite eventful. They usually are: Last year, then-CEO Bob Chapek first spoke out publicly against Florida’s so-called “Don’t Say Gay” law, which went into effect days later.

Aside from Trian, Iger continues to face a number of challenges and changes. Chapek was suddenly dropped in November and the follow-up question is ongoing. Iger has a two-year contract. The company will also have a new chairman in Parker, who is also executive chairman at Nike. He replaces Susan Arnold as Disney says she has reached her 15-year term as a board member, the maximum term allowed under the company’s charter.

Trian seems to be saying the silent part out loud. In a CNBC interview, Peltz compared Disney to communist China and said its $71.3 billion acquisition of most of 21st Century Fox in 2019 threw the company into financial turmoil and helped raise the dividend, a fixed worth of 57 years. by the company’s many private investors. Disney (and others) cut their dividends to save money during the pandemic and have yet to implement it.

Just before Christmas, Iger called Peltz to say a virtual meeting was planned, but that it was unlikely to take place before January 6 “due to Mr Iger’s plans to sail his yacht off the coast of New Zealand”.

SEC Filing

A brief passage in an SEC filing details a full chronology from Trian’s point of view. Peltz spoke with Chapek last summer, when the director was still CEO, the filing said, when he voiced his criticism of the company and expressed his desire to sit on the board. In the months that followed, Chapek’s impeachment and a looming deadline for adding new board members before the shareholder vote complicated the dialogue. Just before Christmas, Iger called Peltz to say a virtual meeting was planned, but that it was unlikely to take place before January 6 “due to Mr Iger’s plans to sail his yacht off the coast of New Zealand”.

A meeting was finally scheduled last week.

The Disney episode followed a familiar playbook for Peltz, whose board activities have drawn him much attention in financial circles since Trian’s founding in 2005. He is currently non-executive chairman of The Wendy’s Corp. and serves on the boards of Unilever and Madison Square Garden Sports Corp., the parent company of the New York Knicks and Rangers. Brooklyn-born Peltz, 80, is a hockey fan and friend of MSG chef James Dolan, and has a personal investment in MSG. Former board positions include Procter & Gamble, HJ Heinz and Sysco. Consumer products, not media, have generally been Peltz’s wheelhouse.

Trian has a nearly $1 billion stake in Disney, but given the media company’s size, that means the position is only about half a percent. While that modest commitment and Peltz’s relative lack of media experience may have put off some Wall Street backers, Trian says they are only seeking a seat on the board, and that Peltz’s consumer experience aligns with Disney’s significant presence in theme parks and merchandising. .

Disney, which has hit an eight-year low in recent weeks and underperformed the S&P 500 and many media peers, initially responded well to Peltz stirring the pot, rising more than 3% on Thursday. However, on Friday they fell a fraction of a point to close at $99.40.

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Iger has already outsourced the work to him due to uncertainty in the theatrical film industry, negative momentum in the pay television industry and other headwinds. While he moved quickly to undo some of Chapek’s moves, he was also the one who put Chapek in control in the first place. It’s a decision that many observers inside and outside the Burbank company still can’t reconcile with Iger’s legendary run as CEO from 2006 to 2020.

Wall Street analyst Michael Nathanson, who maintains a “buy” rating on Disney shares, wrote a note to clients Thursday expressing his support for Peltz’s intervention, though he hopes Iger will carry out his plans allowed .

“While we believe Trian is right to acknowledge these issues, given the change in leadership, we believe the company will take immediate action to improve profitability,” he wrote.

“In our view, Disney’s underperformance relative to the S&P 500 is a combination of macro issues (such as slowing consumer spending and advertising delays), pandemic impacts from park closures, post-pandemic structural headwinds such as accelerated cord-cutting and lower box office attendance. the few self-inflicted actions are the acquisition of 21st Century Fox, which increased Disney+’s TAM [total available market] Late 2020 (which forced the company to spend more on broader content offerings), and the decision to further strengthen cricket rights in India and non-primary sports at ESPN.”

Overall, Nathanson expressed “optimism” that Iger will “make the tough decisions that align with Trian’s goals.” Disney’s long-term profitability will therefore be “higher now than under previous leadership.”

Disney hasn’t had to deal with such a shareholder discrepancy since the early 1900s. Former Walt Disney executives Roy E. Disney and Stanley Gold caused a stir at the 2004 annual meeting in a bitter battle to oust then-CEO Michael Eisner. Shareholders at that meeting gave a shocking 45% vote of no confidence in Eisner, who was stripped of his chairmanship. Disney and Gold also threatened a proxy fight to list opposition directors at the next annual meeting, but backed off. Iger, an ABC and Disney partner, eventually emerged from the turmoil to become the company’s CEO.