There is major news in the ongoing proxy fight over control of the Walt Disney Company between the Iger-dominated current Disney board and “activist” investor Nelson Peltz’s Trian Partners and HIS partner in that effort, former Marvel boss Issac Perlmutter who added his own stock to Trian’s in this impending stock battle.
Nelson Peltz via David Rubenstein YouTube
One of the “knocks” against Peltz that Disney boss Iger has stressed is that Peltz, a billionaire investor and business leader, hasn’t got “media experience” necessary to understand how the Disney empire works. Well, that argument is now moot as Peltz, who we all speculated would seek one or more seats on the Disney board, announced that he’d go after two—one for himself as a qualified business expert and famous reviver of companies that had lost their financial way, and one for James A. “Jay” Rasulo who is the former CFO of Disney itself and knows the company all too well.
Rasulo was Senior Executive Vice President and Chief Financial Officer at The Walt Disney Company from 2010 to 2015 and notably the company prospered during his tenure, seeing returns for shareholders of 27% and compounded Earnings Per Share increase of 20% plus an overall increase in the price of Disney stock of over 250% and a generous and steady dividend. Before being appointed CFO, Rasulo was Chairman of Walt Disney Parks And Resorts Worldwide from 2005-2009 and president of Walt Disney Parks and Resorts (the domestic ones) from 2002-2005 creating steady annual income growth.
The Walt Disney Company’s CFO Jay Rasulo leading a business discussion in the Spring of 2014. Photo Credit: Ejalversoniii, CC0, via Wikimedia Commons
Clearly between Peltz’s acumen at taking companies which, as Trian said in their press release about this news is true of Disney, “…has woefully underperformed its peers and its potential” and turning them into moneymakers and customer pleasers and Rasulo’s intimate knowledge and successful experience within the company, Trian is packing a powerful one-two punch that they can expect many investors to find favorable at the next annual meeting in the spring when the vote on board members and the company’s future will take place.
Trian’s statement also adds, “For shareholders, this subpar performance has destroyed value. Disney stock has underperformed the stocks of Disney’s self-selected proxy peers and the broader market over every relevant period during the last decade and during the tenure of each non-management director. Furthermore, it has underperformed since Bob Iger was first appointed CEO in 2005 – a period during which he has served as CEO or Executive Chairman (directing the Company’s creative endeavors in this role) for all but 11 months. Disney shareholders were once over $200 billion wealthier than they are now.”
“Unfortunately, the Board and CEO appear to have no conviction that things will get better,” it continues. “The non-management directors collectively own less than $15 million of Disney stock, and Mr. Iger has sold the vast majority of his ownership stake built up primarily through share-based compensation – more than $1 billion of Disney stock – leaving shareholders alone to face the daunting reality of a complex turnaround in a rapidly evolving industry.”
Bradley Cooper and Bob Iger attend the Guardians of the Galaxy Vol. 3 Premiere at the Dolby Theatre in Hollywood CA on Thursday, April 27, 2023.
(Photo: Alex J. Berliner/ABImages)
Furthermore, Trian asserts, “And, that turnaround does not appear to be materializing. Since Mr. Iger’s first earnings call after returning as CEO:
• Tens of billions of shareholder value has been lost;
• Consensus EPS estimates for fiscal years 2024 and 2025 have fallen meaningfully, even as the
Company claims to be cutting billions of costs; and
• Studio content continues to disappoint consumers, slowing the speed of the flywheel and threatening
future earnings growth.”
“More generally, Disney appears no closer to adequately addressing the compensation misalignment, governance, and succession issues that have plagued the Company for decades. The root cause of Disney’s underperformance, in our view, is a Board that is too closely connected to a long-tenured CEO and too disconnected from shareholders’ interests. The Board, we believe, lacks objectivity as well as focus, alignment, and accountability,” Trian declared.
Bob Iger via New York Times Events YouTube
Disney responded to Trian’s move with their own statement, “The Walt Disney Company confirmed today that Trian Fund Management, L.P., alongside certain affiliates, including Trian’s previously disclosed partnership with Isaac Perlmutter pursuant to which it obtained beneficial ownership of Mr. Perlmutter’s Disney shares (collectively, “Trian”), has provided notice of its intent to nominate two individuals for election to the Company’s Board of Directors at the 2024 Annual Meeting of Shareholders.”
Furthermore, Disney stated, “Disney has an experienced, diverse, and highly qualified Board that is focused on the long-term performance of the Company, strategic growth initiatives including the ongoing transformation of its businesses, the succession planning process, and increasing shareholder value.”
“The Governance and Nominating Committee, which evaluates director nominations, will review the proposed Trian nominees and provide a recommendation to the Board as part of its governance process,” Disney continued. “The Company expects to file preliminary materials with respect to the 2024 Annual Meeting of Shareholders with the Securities and Exchange Commission (“SEC”), which will include the Board’s recommended slate of director nominees. Disney shareholders are not required to take any action at this time.”
Cinderalla’s Castle in Walt Disney World via 4k WDW YouTube
In conclusion, it is clear that this fight is far from over, has become quite personal, and now, with the addition of Rasulo to the outsider team, is heating up well in advance of the stockholder vote. We also know that Peltz’s past practice in launching such takeover proxy fights is to issue a “white paper” full of details about where he thinks the company is going wrong.
Clearly the facts above plus a lot more (including the potential multiple civil and criminal cases involved in the recent CFTOD Audit of the former Disney-captured Reedy Creek Improvement District that TPP has covered elsewhere) will make that paper fascinating reading for Disney fans, customers, and stockholders alike. Stay tuned to That Park Place for further developments.
I messaged Trian and told them I have stories for Star Wars that will compete with WB’s Dune Messiah and together will give the Infinity Saga true competition without having to use a single Skywalker. The damage that has been done to Disney will take time to repair but my offer to Lucasfilm remains. I want to pitch my ideas please. I believe Lucasfilm’s path back to success is in the cinema. And I believe Disney’s studios should distance themselves from each other to forge their own way to success rather than being collectively stained by Disney’s actions and influence.