Media and entertainment giant Walt Disney Co (NYSE:DIS) is attempting to prevent activist investor Nelson Peltz from joining the company’s board, after his asset management firm Trian Fund Management nominated him.
Peltz said Disney “lost its way,” leading to a steep decline in the company’s financial performance. Disney’s stock rose on Thursday after closing as investors feel the upcoming proxy battle is positive for shares, suggesting DIS is currently acting as a value stock. Disney stock lost almost 40% of its value in the past year amid mounting streaming costs and a thin slate of theatrical releases.
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Peltz Ups the Stake
Peltz’s move comes less than two months after the Wall Street Journal reported that Trian built a stake worth over $800 million in Disney in an attempt to win a board seat. The stake is now valued at around $900 million with Peltz reportedly looking to further increase his Disney holdings.
The asset manager is looking to make operational improvements at Disney and cut costs, according to its official announcement on Wednesday. The firm added it will file a proxy statement with the U.S. federal regulators today.
Furthermore, Trian said it wants to keep Bob Iger as Disney’s CEO, saying it wants to cooperate with him to ensure a successful CEO transition in the following two years.
"Trian's objective is to create sustainable, long-term value at Disney by working WITH Bob Iger and the Disney Board," the statement reads "We recognize that Disney is undergoing a period of significant change and we are NOT trying to create additional instability."
Disney preempted the firm’s statement, saying it does not support Peltz’s pursuit of a board seat. The company said it has “engaged with Mr. Peltz numerous times over the last few months” but it does not back “the Trian Group nominee, and recommends that shareholders not support its nominee, and instead vote for all the company's nominees.”
The WSJ reported that the two sides were engaged in talks earlier this week with Iger offering a board observer position to Peltz if he signs a standstill agreement. The activist investor rejected the proposal and opted to launch a proxy fight in a bid of winning the board seat.
Meanwhile, Disney appointed Nike’s executive chairman, Mark Parker, as its new chairman of the Board. Parker has been serving on Disney’s board for seven years and will replace Susan Arnold, who will complete her 15-year term limit at the company after its next annual shareholder meeting. Disney’s board will consist of 11 members following Arnold’s exit.
Parker had been credited for helping Nike become one of the most successful consumer brands in the world. Arnold says Parker is “uniquely positioned to chair the Disney Board during this period of transformation.” He will take the chairman role after seven years as Disney’s board member.
Iger Continues to Drive Changes
In November, Disney reappointed Bob Iger as its CEO, in an unexpected move to replace Bob Chapek, who faced criticism for his management of the company. Iger was brought in to lead Disney for two years and help the company spur growth and find a suitable successor at the completion of his term after Chapek’s surprising exit. Trian slammed Disney on Wednesday for unsuccessful succession planning.
Before reappointing Iger, Disney announced a companywide cost-cutting plan, banning all but essential work travel and halting new hires, except for several key job roles. Iger maintained the hiring freeze when he took charge of the company.
Yesterday, Disney announced the long-expected updates to the reservation and ticketing system, as well as its annual pass membership program after facing criticism from consumers over long wait times and tremendous ticket prices. The announcement marked the first significant change within Disney’s Park business since Iger’s return, who has voiced his concerns about the drastic price hikes implemented by his predecessor Chapek.
While it seems unlikely that Iger will reverse the price increases in 2023, the new changes are set to “increase flexibility and add value” to users’ experience, said Josh D’Amaro, Chairperson of Walt Disney Parks and Resorts.
The newly announced changes bring further incentives for premium plans for park members, including perks to secure the lowest-priced ticket options of $104 per guest at the company’s Disneyland Resort in California.
Moreover, the updates also include improved services such as free parking for resort guests and free digital photo downloads for the users of Genie+app. Meanwhile, those who have the Walt Disney World annual pass will now be allowed to visit the theme parks after 2 PM with no need for a park reservation, with certain exceptions. At the moment, the annual passholder membership is priced between $749 to $1,399.
Disney’s Park and Resort unit are central to the company’s business. The parks division’s revenue rose 73% year-over-year to $28.7 billion in fiscal 2022. The operating income stood at $7.9 billion at the end of the fiscal year, accounting for 65% of Disney’s total segment operating income of $12.1 billion.
Summary
Disney and Nelson Peltz’s Trian Fund are bracing for a proxy fight as the activist investor seeks to obtain a seat on the company’s board. Two sides held unsuccessful talks earlier this week as Disney shares trade higher in the anticipation that the upcoming battle will be positive for shares.
Shane Neagle is the EIC of The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.
