Saturday, July 13, 2024

Disney Activist Investor Escalates Proxy Battle for Board Seat

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In what is shaping up to be a relentless pursuit of a seat on Disney’s Board of Directors, activist investor Norman Peltz, who has purchased just under $1 billion in the company’s stock in the hopes of changing the way the company operates, has written a proxy statement and open letter asking them not to vote for one of their own.

Peltz, the CEO of Trian Fund Management, submitted the proxy statement on Thursday asking Disney shareholders to vote for him instead of Michael B.G. Froman, a Mastercard executive, according to the Wrap. Peltz has specific ideas about Disney’s financial future and now that he has the shares, he is going after a coveted board seat to implement his plans.

Accompanying the proxy statement was an open letter in which Peltz charges that the current board has failed to instill a “culture of accountability,” by paying executives high salaries, even when the company was performing poorly, and won’t listen to “constructive shareholder input.” Disney was also critiqued for “failing to properly plan for leadership succession,” after retired CEO Bob Iger had to be brought back to the company recently for a two-year stint where his key stated objective is to do just that.

“With Disney’s stocks plunging 44 percent in 2022, shareholders have collectively lost over 120% of market value,” Peltz wrote, also mentioning that “earning share base declined an astounding 50 per cent since 2018 because costs have ballooned even though even as Disney has generated 41 percent more revenue.”

In the world of big business, this is known as a proxy battle, or a situation in which a group of shareholders in a company join forces in an attempt to oppose and vote out the current leadership. Disney responded to Peltz in a statement on Thursday.

“The Disney Board of Directors does not endorse Nelson Peltz (or his son Matthew, who is running as an alternate Mr. Peltz may swap in) as a nominee, and believes the election of either Mr. Peltz or his son would threaten the strategic management of Disney during a period of important change in the media landscape,” the company said. 

In the response, Disney addresses Peltz “inexplicably” singling out Froman in his pursuit of a Board seat, saint the executive is “a highly valued member of the board with deep background in global trade and international business, who the board believes is far better qualified than either Mr. Peltz or his son.” The retort also points out that neither Peltz nor his son offer added value or experience. 

Disney also got down-and-dirty with the proxy voting material, sharing what they had sent to their shareholders; instructions were simple: Throw out the blue card and wait for the white card.

“The company expects to mail its proxy materials, including its WHITE proxy card, to all shareholders in the near future. The Disney board urges shareholders to take no action at the moment and to simply discard any materials or blue proxy card they may receive from Trian Group. Shareholders should instead give themselves the benefit of voting on a fully informed basis…,” Disney wrote.

The company has recommended that its shareholders vote for Froman to stay on the board, according to the Wrap; it is unclear why Peltz targeted him in the first place.

A representative for Peltz Thursday had no comment.

Peltz is a career board-sitting warrior, and so far, this all amounts to child’s play for him. He’s had stints at the boards of Procter & Gamble, Heinz, Unilever, Wendy’s, Ingersoll-Rand, and Mondelez International. In 2015, he got into a proxy fight with DuPont, which he lost, and subsequently became known for “waging campaigns against the management,” as the Financial Times reported. In 2006, he was involved in a proxy battle with Heinz to get two independent members, including himself, on its board.

Disney knows all this, and would prefer that Peltz not sit on its board and has said so publicly; but the company is likely dismayed that this escalating situation even went public in the first place. A meeting with Disney executives and Peltz in early January failed. In a presentation filed with the SEC following the activist investor’s initial efforts, the company argues Peltz “does not understand Disney’s businesses, and lacks the skills and experience to assist the board in delivering shareholder value in a rapidly shifting media ecosystem.”

Large-cap companies suffering from battered stocks can leave them vulnerable to activists and the phenomenon of “swarming,” which is when the firm gets in the crosshairs of more than one activist investor zooming. 

Disney is not the only major U.S.-based company fighting off such a gadfly. Currently, there are at least four activists in Salesforce, and the nation’s largest freight broker, C.H. Robinson, recently came to terms with their activist investors after deciding to work with him, reports the WSJ.

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