The Battle Over Disney’s Future Is About To Be Decided In A High Stakes Board Vote

This week, a fierce war over Disney’s future will be decided as one of history’s most costly proxy campaigns culminates in a high-stakes shareholder vote on Wednesday.

The issue is Disney’s (DIS) stock price, which has climbed about 50% in the last six months but cannot satisfy the desire of certain investors seeking a larger return. Should activist investors gain a seat on the company’s board, they intend to shake up the Magic Kingdom and its extensive empire, which includes animation, streaming services, and theme parks.

The Battle Over Disney’s Future Is About To Be Decided In A High Stakes Board Vote

Two opposing board seat slates are now up for election against Disney’s. One is in charge thanks to Trian Fund Management, which has put forward its 81-year-old founder, Nelson Peltz, a well-known billionaire corporate raider, and Jay Rasulo, a former Disney CFO. Another minor challenge comes from Blackwells Capital, which is seeking three seats.

The main danger, however, comes from Peltz, whose combination with former Marvel head Ike Perlmutter can bring about significant change at Disney if successful.

Peltz has blasted Disney’s recent theatrical disasters and suggested that the company’s Disney+ streaming service achieve “Netflix-like margins,” among other things. The activist investor and his Trian fund aim to match senior executives’ pay with their performance, restore Disney’s box office dominance, and increase its profit margins. He also wants to ensure that CEO Bob Iger, known for sticking on longer than planned, truly walks down in 2026 at the end of his contract.

However, the strategy is similar to what Iger and his colleagues are already using, and analysts are still determining how Peltz and Rasulo will address the issues.

“I don’t think [Peltz has] offered a turnaround plan that would make people say, yeah, we need to get Peltz in there and change things,” Barton Crockett, senior research analyst at Rosenblatt Securities, told CNN.

What exactly is the point of contention?
In recent years, Disney has suffered a surprising number of box office flops, dwindling viewership on its linear television networks, including ESPN and ABC, and enormous losses as it expands its streaming business to compete with Netflix.

Peltz says he hopes for a turnaround.

“Despite its numerous advantages, Disney has lost its way. Disney lost its movie office dominance, was late to enter the streaming market, and doubled down on linear TV at the wrong time,” Trian stated in a letter to Disney shareholders earlier this month.

What happens on Wednesday?
At 1 p.m. ET, Disney will convene its annual shareholder meeting. During this meeting, shareholders will vote on “slates” of board member positions, including those of Trian and Blackwells. The voting results, which are now underway, will then be announced.

If Peltz is successful, he and Rasulo might gain up to two seats on the board, unseating Disney’s nominees. The pair might influence the company’s trajectory, which some analysts feel could speed Iger’s exit. Iger returned to the leadership role in 2022 after his hand-picked replacement, Bob Chapek, was sacked.

Peltz, who has no entertainment background but has successfully waged proxy wars, has stated in interviews that he wants to collaborate with the current leadership to shake up the media conglomerate.

“We want to ensure that this company finally succeeds. “It’s been mistreated for a long time, and that needs to change,” Peltz said in a proxy combat video on Trian’s website.

The Battle Over Disney’s Future Is About To Be Decided In A High Stakes Board Vote

How is Disney fighting back?
Typically, shareholder meetings and voting are dull exercises that receive little attention from the public.

But Disney is taking the danger seriously. More than $60 million has been thrown into the boardroom struggle, mostly from Disney, which is battling to retain Iger and its board in place.

Disney and its allies claim that the turnaround is already underway under Iger and that the Trian proxy war stems partly from a personal vendetta after Perlmutter was fired from the firm last year.

However, it faces a particular issue in persuading shareholders: Unlike other publicly traded corporations, many investors are “retail investors” — ordinary people who invest in businesses.

These individuals own more than 35% of Disney’s stock, and their votes might have a significant impact. So Disney has treated the campaign like a political campaign, producing a campaign website, removing Google search ads, and advertising on prominent podcasts such as “Smartless.” It even relies on some of its most popular animation characters.

“They’ve really pulled out all the stops in responding to Nelson Peltz and the other activists, and dismissing and attacking them on multiple levels, even going to the place of pulling out Disney intellectual property and calling Peltz a ‘Pinocchio,'” Crockett said in a statement.

Anna and Elsa from “Frozen” have also appeared on materials distributed to shareholders, while the relatively unknown figure Ludwig Von Drake hosted an animated short video explaining how shareholders vote.

“Disney has the right strategy to drive profitable growth and value creation for shareholders and has made substantial progress against our objectives to make our business more efficient and effective, including a sharpened focus on our greatest brand and franchise assets, a continued commitment to cutting costs and a reinstatement of the dividend,” the company said in a statement issued last week urging support for the members of its board of directors.

In addition, Iger and other senior Disney officials have been traveling throughout the country to meet with larger and institutional shareholders, according to a person familiar with the situation.

Disney has also lined up some big names to back its board, including director George Lucas, JPMorgan Chase CEO Jamie Dimon, former Disney CEO Michael Eisner, and billionaire philanthropist Laurene Powell Jobs. Even Disney family members who have been critical of the firm, such as Abigail E. Disney, have come out against Peltz’s boardroom war.

The Battle Over Disney’s Future Is About To Be Decided In A High Stakes Board Vote

“Clearly, Bob Iger and the board have taken this very seriously and put out an amazing amount of material, and they’ve met with investors,” Jessica Reif Ehrlich, managing director of BofA Securities, told CNN. “Nelson Peltz has gone public, so it’s very contentious, very loud, very public.”

Meanwhile, Peltz has recently won backing from the California Public Employees Retirement System (CalPERS) and private investment company Neuberger Berman, undermining Disney’s efforts to avoid a board conflict. The powerful consulting firms Institutional Shareholder Service and Egan-Jones have also endorsed Peltz for at least one seat on the board.

While Disney isn’t taking any chances, some analysts believe that if Peltz wins a seat or two at the table, it might pave the way for Iger to leave the House of Mouse sooner than expected in 2026.

“It’s clear that Iger doesn’t want to deal with him,” Crocket stated about Peltz. “So, I guess the one thing that I would wonder about, not from an operational perspective, but from a leadership perspective, is that if Peltz wins, it might hasten the departure of Iger.”

SOURCE – (CNN)