Walt Disney has a shareholder fight on its hands.
Activist investor Nelson Peltz, who runs Trian Fund Management, said on Thursday that he would make his case directly to shareholders for a seat on Disney’s board. This comes after Disney added new directors and promised to turn the struggling business around, but ultimately rejected his request to join the board.
“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,” Trian said in a statement. “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 released a statement defending its efforts to improve the business.
“The Walt Disney Company has a proven track record of delivering long-term value to our shareholders and is in the midst of a significant transformation to reinforce our position as the world’s preeminent entertainment company,” the company said. “Over the past twelve months, we restructured the company to restore creativity to the center of all our businesses as we significantly reduce costs and drive efficiencies, and we are on track to achieve about $7.5 billion in cost savings – $2 billion more than our original target.”
The proxy fight, in which Peltz will seek support from other investors dissatisfied with Disney’s performance, marks the latest problem for the House of Mouse. The company has dealt with several box office disappointments, including this past weekend’s deflated debut of animated film Wish, which comes on top of poor response to The Marvels. CEO Bob Iger ignited deal speculation in a July interview on CNBC when he said some parts of the business weren’t core to Disney, prompting Allen Media Group, which owns Local Now, several local broadcasters, and The Weather Channel, to make an unsolicited bid for the ABC Network and its cable channels.
Iger earlier this week denied ABC or ESPN were for sale, although he has previously said he was looking for a strategic partner to help launch a direct-to-consumer streaming version of its sports network. Iger had rejoined Disney a little more than a year ago, replacing his hand-picked successor, Bob Chapek, after Disney started going off the rails. But the problems for Disney persisted even under Iger, including shareholder lawsuits over how Disney+ was run, to continued losses in its streaming services.
Trian had sought changes earlier this year, but Disney had managed to convince the fund, which owns $3 billion of stock in Disney, to hold off on taking action, giving Iger time to turn the business around.
Disney noted that 78% of the shares that Peltz refers to is owned by Isaac Perlmutter, a former Disney executive, intends to take its case to shareholders. Perlmutter was fired from Disney earlier this year, and Disney said the former executive had a personal agenda against Iger.
Peltz and Trian will take their case to Disney shareholders.
“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,” Trian said.