Disney's biggest shareholder fight in 20 years will shape the company's future

Meg James, Los Angeles Times on

Published in Business News

Trian's campaign has gained momentum.

Influential corporate proxy advisory firm Institutional Shareholder Services Inc. recommended that investors put Peltz on the board. Late last week, the California Public Employees Retirement System, one of the nation's largest pension funds, chimed in, saying Disney's board could benefit from "fresh eyes." CalPERS, which is Disney's 26th largest institutional investor, according to data firm FactSet, said it voted its nearly 7 million shares for Peltz and Rasulo.

Peltz's previous corporate activism, and alliance with Perlmutter, has come under the spotlight. Peltz's firm argues that the 11 Trian investments for which he joined the boards subsequently delivered 17% average annualized returns.

But Yale University management professor Jeffrey Sonnenfeld has blasted Peltz's record in a Harvard Law School Forum article he co-wrote, saying a majority of companies whose boards he joined underperformed the market.

"Peltz has a long history of value destruction," Sonnenfeld said.

The billionaire investor amassed a multimillion-dollar fortune by the 1980s through a number of leveraged buyouts financed by junk bonds sold by Michael Milken. His most celebrated deal was buying Snapple, the beverage company, from Quaker Oats for more than $300 million, and selling it a few years later for about $1 billion.

Peltz has mounted successful proxy contests with three other companies: Heinz in 2006, DuPont in 2015, and Procter & Gamble in 2017. He has been the chairman of Wendy's board since 2007.

However, Disney and others said his election to the board could become too disruptive.

Blackwells has also been deeply critical, saying "Trian's campaign prioritizes Mr. Peltz's ego over what is best for all Disney shareholders." The firm pointed to Peltz's comments about diverse movie casts, saying they should "disqualify him from sitting on the Disney Board."

The University of Delaware's Elson scoffed at some of the criticism.

"To simply say, 'he can't come into this boardroom because his presence will be disruptive,' hasn't necessarily proven to be the case on other boards he served on," Elson said. "The points he is making are valid."


Another influential proxy advisement firm, Glass Lewis, rejected the Blackwells candidates along with Peltz and Rasulo, saying, "we struggle to see many of Trian's intentions as representing a likely net gain for investors."

In its recommendations, Institutional Shareholder Services split its endorsement, suggesting investors vote for Peltz but not Rasulo, saying his presence could bring "added friction to the board."

A Goldman Sachs report last year found a mixed record of stock performance by companies that had become targets of activist investors. Shares initially climbed higher but most failed to generate substantially higher long-term returns, the report found.

Disney has been trying to appeal to large institutional shareholders, such as Vanguard, BlackRock and State Street, in addition to its legion of mom and pop investors, who adore all things Disney.

According to Factset, Disney's shareholder base is about two-thirds large institutions and a third smaller investors.

In the closing weeks of the campaign, Disney has rolled out big names in support, including Laurene Powell Jobs, founder of the Emerson Collective ; JPMorgan Chase CEO Jamie Dimon; "Star Wars" creator George Lucas and the heirs of company founders Walt and Roy Disney, including Abigail Disney, Walt's great-niece who previously has been critical of Iger's compensation.

Eisner, the former CEO, also weighed in on social media platform X, formerly Twitter.

He mentioned a campaign 40 years ago, when "corporate raiders" tried to take over the company after more than a decade of struggles following co-founder Roy O. Disney's death. That fall the board turned to Eisner and his longtime lieutenant, Frank Wells, to lead the company.

"Bringing in someone who doesn't have experience in the company or the industry to disrupt Bob and his eventual successor is playing not only with fire but earthquakes and hurricanes as well," Eisner wrote. "The company is now in excellent hands and Disney shareholders should vote for the Disney slate."

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