It’s crunch time for Disney and Trian Fund Management and Blackwells Capital, who have one final day to sway investors to vote for their board nominees ahead of the entertainment giant’s annual meeting.
Shareholders will have the opportunity to weigh in on the strategic transformation being executed under Disney CEO Bob Iger, who returned to the role in November 2022 after Bob Chapek’s ouster. Disney has approximately 1.83 billion outstanding shares.
The House of Mouse has spent an estimated $40 million to fend off the activist investors’ proxy campaigns, while Trian has spent upwards of $25 million and Blackwells has spent around $6 million.
The meeting, which will kick off at 10 a.m. PT/1 p.m. ET on Wednesday, will be webcast live here. Eligible shareholders can participate at this link.
Here’s everything you need to know ahead of the contentious board election.
Who is Trian Fund Management?
Trian Fund Management is an activist investment firm that was founded by Nelson Peltz and Peter May and Edward Garden in 2005, which invests in “high quality but undervalued and underperforming public companies” and works with management teams and boards to “help companies execute operational and strategic initiatives designed to drive long-term sustainable earnings growth for the benefit of all shareholders.”
The firm, which dropped a proxy battle in February 2023 after Disney announced plans to restructure the company, has returned with a push for two board seats. It argues that Disney has “woefully underperformed its peers and its potential,” citing tens of billions of dollars in lost shareholder value, a meaningful drop in consensus earnings-per-share estimates for fiscal years 2024 and 2025 and studio content that “continues to disappoint consumers, slowing the speed of the flywheel and threatening future earnings growth.”
The root cause of that underperformance, Trian argues, is “a board that is too closely connected to a long-tenured CEO and too disconnected from shareholders’ interests,” and that “lacks objectivity as well as focus, alignment, and accountability.”
The result, Trian added, “has been questionable strategic and capital allocation decisions, including the investment of $200 billion of capital without any discernible return, the demonstrable lack of alignment between executive compensation and shareholder value creation and financial results in the most recent year that pale in comparison to the results five years ago.”
Trian hopes that putting in place two new directors – Peltz and former Disney Chief Financial Officer Jay Rasulo – could “shake things up and lead to Iger being more challenged,” Dr. Ann Murphy, a business professor at Stevens Institute of Technology, told TheWrap. “Boards are legendary for being entrenched with their CEO. Iger wields a lot of influence in corporate circles, and powerful CEOs tend to wield that power over directors. For Iger, this has meant him moving full steam ahead with bold strategies with little resistance from the board since he rejoined Disney in late 2022.”
Peltz currently serves as the non-executive chairman of The Wendy’s Company and a director of Unilever PLC and Madison Square Garden Sports Corp. Other companies where the 81-year-old has previously served as a board member include Janus Henderson Group plc, Invesco Ltd., Procter & Gamble, Sysco Corporation, Legg Mason, Inc. and Mondelez International.
Rasulo was once seen as a potential heir apparent to Iger and was ultimately passed over for the chief operating officer role. He spent three decades at Disney, serving as president of Walt Disney Parks and Resorts from 2002 to 2005, chairman of Walt Disney Parks and Resorts Worldwide from 2005 to 2009 and senior executive vice president and CFO from 2010 to 2015.
“The Disney I know and love has lost its way,” Rasulo said in a statement. “As independent voices in the boardroom, Nelson and I are confident that the combination of my decades of experience at Disney, Nelson’s significant boardroom skills and history of driving positive strategic change, and our combined consumer brands expertise and financial acumen, will be additive to the Disney Board.”
Trian beneficially owns around 32.3 million Disney shares – 79% of which are owned by ex-Marvel Entertainment Chairman Ike Perlmutter. Meanwhile, Rasulo owns approximately $800,000 worth of Disney shares.
Who is Blackwells Capital?
Blackwells Capital is an activist firm that was founded in 2016 by its chief investment officer Jason Aintabi. The firm has served on boards in the media, private equity firms and has held operating roles and served on the boards of media, energy, technology, insurance and real estate sectors.
Its nominees for the Disney board include former Warner Bros. and NBCUniversal executive Jessica Schell, Tribeca Film Festival co-founder Craig Hatkoff and TaskRabbit founder Leah Solivan.
Despite supporting Disney’s turnaround efforts, Blackwells believes its own campaign “provides shareholders a necessary alternative to what would otherwise be a solipsistic sideshow.” The firm is also suing Disney over its information-sharing agreement with another activist investor, ValueAct Capital, struck in January.
As of the end of January, Blackwells Onshore I LLC beneficially owned 30,850 shares of Disney common stock, while Blackwells Capital and Aintabi each own 128,600 shares. Hatkoff, Schell and Solivan did not own any shares of Disney stock as of the time Blackwells proxy statement was filed.
Why are activist investors pushing for board seats and how do they propose to turn Disney around?
At the heart of the dispute is Disney’s stock price, which fell to a 52-week low of $78.73 in October but has rebounded to $122.82 as of Tuesday’s close, slightly below its 52-week high of $123.74, but still well off its all-time high of $201.91. Shares are up 35.4% year to date and 54.41% in the past six months.
Other core issues include ensuring a smooth succession transition for when Iger’s contract expires at the end of 2026, finding solutions to address the company’s declining cable business and box office struggles, and reaching streaming profitability while catching up to industry leader Netflix.
Trian has proposed a number of initiatives to “restore the magic,” though many have already been in the works at Disney. Ideas include a new “streaming margin” incentive for executives to target a Netflix-like 15-20% margin by 2027, potentially limiting investment in Hulu + Live TV, phasing out the Hulu title in Disney+ and fully consolidating the two streaming services and allocating more of its budget to lower-cost, easier-to-produce projects.
It also called on Disney to scale back its ESPN DTC plans and focus on maximizing the value of ESPN+ and the existing linear business or move forward with a bundle partner like Netflix or Amazon, to set a long-term free cash flow growth target beyond 2024, and to find strategic partners for its non-sports linear assets and better integrate streaming with other business lines to drive traffic, such as shopDisney.
Meanwhile, Blackwells’ proposals include a real estate and strategic asset review, a potential split of the company, and a push to prioritize artificial intelligence and spatial computing.
How has Disney responded?
Disney’s board has rejected Trian and Blackwells’ nominees, arguing that they aren’t up to the task “in the face of continuing industry-wide challenges.” The board also criticized Peltz and Rasulo’s “track record of value destruction.”
Instead, it is urging shareholders to vote for its own slate of 12 nominees: Iger, Mary Barra, Safra Catz, Amy Chang, Carolyn Everson, Michael Froman, Maria Elena Lagomasino, Calvin McDonald, Mark Parker, Derica Rice and recent appointees James Gorman and Jeremy Darroch.
In rejecting Blackwells’ proposed board members, Disney has said Schell could not be an independent-minded director, citing the fact that her brother, Connor Schell, develops, produces and sells content to media companies including Disney’s ESPN, ABC and Hulu through his production company Words + Pictures.
Disney also said she does not have any experience serving as a director of a public company, and that Hatkoff and Solivan do not have “any relevant large, public media and entertainment company experience or skills” that would assist the board in its strategic transformation.
Peltz, Disney says, “brings no media experience and has presented no strategic ideas for Disney,” while Rasulo’s perspective is “stale” given he left the company in 2015 and has not held any executive positions in the industry since.
As for the proposals, Disney accused Trian of wasting valuable time and resources with its proxy fight, adding its white paper was “littered with false statements and inferences” and “widely criticized for lacking substance and being partially plagiarized from other activist presentations.” Disney also branded Perlmutter as Trian’s “silent partner” and said the firm neglected to address his “well-chronicled, difficult history” with Iger and other employees.
The exec was laid off from his position as Marvel Entertainment chairperson in March 2023 after years of butting heads with Iger over creative decisions when it came to Marvel movies and TV shows. “It is not credible that Perlmutter is truly just sitting on the sidelines,” Disney added.
When it comes to Blackwells’ ideas, Disney said a break-up of the company would “destroy key competitive advantages” and that putting its assets into a real estate investment trust would “impose burdensome limitations and reduce operational control” in its theme parks. Such a split could impair Disney’s ability to “make changes to attractions, sell integrated vacation packages and other examples that would have negative implications to potential profit growth,” the company said.
“We are not going to jeopardize that powerful value-creation engine by focusing on short-term financial engineering,” Disney said.
Disney argued it is already a “leader in deploying emergent technologies,” citing its partnership with the Apple Vision Pro and the parks business’ work on AI over the last decade.
The entertainment giant’s strategy to drive shareholder value includes restoring the company’s cash dividend, increasing that payment by 50%, a $3 billion share buyback program for fiscal year 2024 and investing $60 billion in its theme parks over the next decade. Disney is also on track to meet or exceed $7.5 billion in cost savings, reach streaming profitability for Disney+ and deliver $8 billion in free cash flow by the end of fiscal year 2024.
Disney, which is buying out Comcast’s minority stake in Hulu for at least $8.61 billion, officially launched a Hulu and Disney+ combined app offering, inked an $8.5 billion deal with Mukesh Ambani’s Reliance Industries for a joint venture that will combine Viacom18 and Star India, took a $1.5 billion stake in “Fortnite” creator Epic Games, obtained the streaming rights to Taylor Swift’s Eras Tour concert film, announced sequels to “Moana” and “Zootopia,” and plans to launch a fully direct-to-consumer version of ESPN in fall 2025, along with a sports streaming joint venture with Fox and Warner Bros. Discovery this fall.
In November, the board of directors appointed two new members: Gorman, the former Morgan Stanley chairman and CEO; and Darroch, the former Sky CEO. Iger has previously said he will “definitely step down” at the end of 2026.
Who’s winning?
According to The Wall Street Journal, Disney has the advantage going into the annual meeting, with more than half of the votes already cast, citing people familiar with the matter.
Eligible shareholders will have until 11:59 p.m. ET Tuesday to lock in their vote. A Disney spokesperson did not immediately return TheWrap’s request for comment.
According to S&P Capital IQ, Disney’s largest institutional shareholders include Vanguard Group (8.26%), BlackRock Inc. (6.62%), State Street Global Advisors (4.13%), Geode Capital Management (1.89%), Trian (1.76%), State Farm (1.75%), Morgan Stanley (1.28%), Northern Trust (1.2%) and Norges Bank Investment Management (1.17%).
Supporters in Disney’s corner include Norges Bank Investment Management, T. Rowe Price, New York City Retirement Systems, activist investor ValueAct Capital, proxy advisory firm Glass Lewis, “Star Wars” creator George Lucas, Laurene Powell Jobs, J.P. Morgan CEO Jamie Dimon, former Walt Disney Imagineering president Bob Weis, “Frozen” star Josh Gad, Walt Disney and Roy O. Disney’s grandchildren and former Disney CEO Michael Eisner.
Meanwhile, Peltz has received endorsements from Neuberger Berman, Yacktman Asset Management, the California Public Employees Retirement System, activist investor Ancora Holdings, over a dozen current and former public company directors who worked with Trian and Peltz on their boards, and proxy advisory firms Egan Jones and the highly influential Institutional Shareholder Services.
What else will shareholders vote on?
While the board election will be watched closely, it isn’t the only issue Disney shareholders will weigh in on.
Other proposals up for consideration include ratifying the appointment of PwC as the company’s independent registered public accountants (Proposal 2); a vote to approve executive compensation packages (Proposal 3); a vote to approve of the amended and restated 2011 stock incentive plan, which would increase the number of shares of Disney common stock authorized for issuance by 115 million shares (Proposal 4); and a vote to ratify a requirement that the board must seek shareholder approval on golden parachutes with an estimated total value exceeding 2.99 times the sum of an executive’s base salary plus target short-term bonus (Proposal 5).
Trian has also proposed a repeal of the amendments made to Disney’s bylaws in November (Proposal 9), while Blackwells has proposed increasing the size of Disney’s board to add any incumbent directors who are voted out in favor of its own nominees (Proposal 10).
Disney has recommended that shareholders vote for proposals 2, 3 and 4 but against proposals 5 – 10.
