Disney prepares for proxy battle with activist shareholder

Company News

by Glenn Dyer


How to waste tens of millions of dollars - have a proxy fight over board representation from an aggressive activist shareholder called Nelson Pelz (who is ‘only' worth around $US1.7 billion) and the veteran Disney chair and CEO, Bob Iger, who is in his second time at the top of the company Hollywood calls ‘The Mouse House”.

But just as the Disney fight was being settled, there’s news that Paramount - the company that owns the Ten Network in Australia - is close to being sold to a private investor called Skydance with reports that the two groups are not far away from a deal.

Now there’ll be speculation about a break up of Paramount to replace all the speculation about Disney.

The boardroom battle was the second time since 2022 that the Nelson Pelz and Disney have gone toe to toe in a fight for dominance at The Mouse House - this time, unlike 2022, it involved a long and nasty shareholder proxy vote.

For much of the past year, Pelz slowly gathered support to force a proxy vote ahead of the Disney annual meeting on Wednesday.

The voting cut off time was midnight Tuesday and as day broke in Hollywood on Wednesday, it became clear that Iger and the board had prevailed and Pelz had lost - for the second time in two years.

And at the meeting on Wednesday, shareholders voted back the entire Disney board, leaving Pelz and his major supporter, the founder of the Marvel group, Ike Perlmutter with a nice capital gain (for him) but defeat overall.

A second activist group, called Blackwells also lost out in trying to get board changes.

Between them Disney and Pelz’s Trian Group spent an estimated $US100 million battling each ther, though some analysts put the figure much higher given the amount of managerial time both sides devoted to fighting each other.

The fight saw the Disney share price rise more than 40% during the battle -nbut they sold off after the vote and closed down more than 3% with the heat and tension out of the share price and no prospect of a split of the empire.

Pelz had tried to get two seats on the Disney board with his expensive campaign but based on the results released on Wednesday, shareholders rejected Peltz’s advance, the company said. They also rejected attempt to win a board seat for former Disney executive James Rasulo.

Disney’s two largest shareholders, Vanguard and BlackRock, decided to back management in the final days before Wednesday’s meeting but a key appears to have been the second biggest shareholders, The Murdoch Family Trust with around 4%.

Peltz argued that Disney CEO Bob Iger has failed to establish an adequate succession plan and that the firm has mismanaged executive compensation and expenses. Iger initially served as CEO for 15 years before stepping down in 2020, when he passed the torch to Bob Chapek. Less than three years later, he returned after growing unhappy with Chapek’s performance.

Disney’s battle with Peltz erupted in 2022, when the billionaire first raised the topic of board representation. Disney told him to go away and Pelz even sought to embarrass Iger, claiming in a public filing with regulators that the Disney CEO tried to schedule a board meeting around plans “to sail his yacht off the coast of New Zealand.”

Eventually, sanity prevailed and the two parties resolved their differences, and Peltz retreated - but not for long.

He returned in 2023 demanding a board seat and got told ‘no’, again, so he took the matter directly to shareholders in a proxy fight, gathering support from some other big shareholders and one big institutional holder - CalPERS, the Californian government employees fund and the largest of its type in the US with close to half a trillion dollars under management.

Peltz has made a similar attack (and had some success) on the boards of major firms like Procter & Gamble, PepsiCo, and DuPont. But not Disney and the question is, did the Murdoch Family Trust with its large shareholding abstain or support Iger and the board?

The Murdoch family view in the argument was not raised all that much with publicity concentrated on Pelz and the shock decision by CalPERS to support him

The Murdoch Family Trust owns around 4.4% of Disney which it secured in the $US71 billion asset swap in 2019 between Fox and Disney. That stake is worth close to $US9 billion.

Now for the next episode which looks like being a replacement for Bob Iger. Disney board member, Dana Walden is the big tip. She’s an experienced media executive. 

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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