Walt Disney (DIS) faces a proxy fight amounting to a shareholder referendum on the struggling media giant's management and governance after rejecting a request for a board seat from activist investor Nelson Peltz.
Funds managed by Peltz's investment firm Trian Partners have accumulated Disney shares worth more than $900 million, representing a stake of just over 0.5% in the company, according to the preliminary proxy statement Trian filed Thursday. "Disney is a company in crisis" as a result of poor governance, expensive deal-making, and inadequate cost controls, Trian said in an accompanying presentation.
- Activist investor Nelson Peltz and his firm Trian Partners have launched a proxy fight to elect Peltz to Disney's board.
- Trian slammed Disney's recent performance but said Peltz is not seeking to replace recently rehired CEO Bob Iger or to break up the company.
- Disney opposed Peltz's bid for a seat, saying it will nominate a slate of the 11 incumbent directors and name Mark Parker, executive chair at Nike, as board chair.
- Separately this week, Disney made changes in its theme park attendance policies to address guest complaints about rising prices and a new reservation system.
Disney shares gained 4% Thursday, adding to the stock's rally from the eight-year low it reached in December after the company slashed 2023 profit expectations amid mounting losses at the Disney+ streaming platform and revenue declines in its television segment.
Amid scathing criticism of Disney's recent performance, Trian said Peltz hopes to work with Disney CEO Bob Iger and a board that rehired Disney's longtime boss in November after firing his successor Bob Chapek. If the 80-year-old Peltz is elected, he would join 10 directors nominated by the company on its board. Trian said Disney's board rejected its request to add Peltz to its slate of director nominees.
Disney said late Wednesday its board elected Mark Parker chair, effective at the conclusion of the 2023 annual shareholder meeting, which has yet to be scheduled. Parker, the executive chair at sportswear giant Nike (NKE), is to succeed current chair Susan Arnold, who will leave the board at that time after reaching her 15-year limit.
On Tuesday, Disney unveiled policy changes at its theme parks addressing mounting complaints from guests about price increases and limited access under a new reservation system. Visitors frequently blamed Chapek for disabled rides, increasingly spotty park upkeep, and high prices. The changes this week expand park access for annual pass holders, expand the number of days on which Disney's lowest-cost $104 single-day park entrance fee will be available, and ditch some of its many guest add-on fees, including for parking at Disney-owned hotels and for attraction photos for guests with Genie+ line-skipping privileges.
Trian said in its presentation Disney is using unsustainable price hikes for park visitors to subsidize its streaming losses. "Disney may believe that price increases and 'nickel-and-diming' of cast members and other costs is good for the bottom line...however, we suspect it is short-term thinking that puts the brand value and long-term health of the business at risk," Trian said.
Trian also said Disney dramatically overpaid for its acquisition of 21st Century Fox for $71 billion in 2019 in a deal that saddled the company with heavy debt and could now force it to take a massive writedown. Trian also criticized "over-the-top compensation practices" that it said netted Iger $216 million in compensation over four years through fiscal 2021. The firing of Chapek five months after company directors unanimously approved a three-year extension to his contract "suggests the board lacks a robust CEO succession process and completely misread the state of Disney’s & Bob Chapek’s performance," Trian said.
Iger, 71, can earn up to $27 million annually under his recently unveiled two-year deal with Disney. "Mr. Iger’s mandate is to use his two-year term and depth of experience in the industry to adapt the business model for the shifting media landscape, rebalancing investment with revenue opportunity," the company said in its response to Trian. Disney's board "has been continually refreshed, with a focus on directors whose industry experience is additive to the company’s strategic priorities," the company said.
Parker, who also will chair the board's newly created succession planning committee, said "it is the top priority of mine and the board’s to identify and prepare a successful CEO successor, and that process has already begun.”
Trian said its goal in nominating Peltz for Disney's board is not to dump Iger or break up the company. Activist investor Daniel Loeb, who reached a standstill agreement with Disney in September after it agreed to add an independent director to its board, had urged the company to spin off ESPN before withdrawing the suggestion.
Trian was less specific about the changes it is seeking at Disney, saying it supports "reinvigorating the Disney flywheel" and "orderly deleveraging." Trian wants Disney to pursue "efficiencies and additional profits" while "ensuring customers get real value across all business lines," the investment firm said.