Disney’s Proxy Fight is Over

Following the Walt Disney Company’s first quarter 2023 earnings call, CEO Bob Iger and activist investor Nelson Peltz were each interviewed by CNBC. This post covers how each went down, including the huge news that the proxy battle has ended.

Let’s start with a quick recap of the saga to date. Nelson Peltz kicked off his campaign to “Restore the Magic,” which was essentially a “Save Disney” remake–minus having Roy E. Disney as the face of the campaign. In that, Trian made a more detailed and nuanced case in contending that many of Disney’s struggles are self-inflicted.

Trian and Peltz pointed to mismanaged succession planning, both in the way Iger v. Chapek was handled and also how prior CEO candidates were pushed aside. They also argued that Disney’s streaming strategy lacked focus and resulted in runaway spending and underperformance relative to Netflix, despite best-in-class IP.

Most notably from our perspective as Walt Disney World and Disneyland fans, the group contends that Disney’s recent approach to Parks & Resorts was unsustainable, with the domestic parks “over-earning” in order to subsidize streaming losses.

Trian’s core thesis is that price increases and nickel & diming is short-term thinking that puts the brand value and long-term health of Disney’s theme parks business at risk. All of this is explained in greater detail in the aforementioned posts, but that’s the saga thus far in a nutshell.

Following that, Disney Fought Back at “Restore the Magic” Campaign. The company released a Powerpoint presentation (in the form of an SEC filing) to plead its case and push back against Peltz. In that, Disney argued that its Board of Directors is independent, highly qualified, and has provided strong oversight focused on delivering superior, sustained shareholder value.

Disney also touted CEO Bob Iger’s track record of growth, and the transformative purchases of Pixar, Marvel, and Lucasfilm, while also arguing that even the 20th Century Fox acquisition was strategically significant. Humorously, Disney also dug at Nelson Peltz, contending that he doesn’t understand Disney’s businesses, lacks the skills and experience to assist the board, and doesn’t have any real plans for change. In so doing, Disney effectively used Peltz’s own words against him, citing fumbled responses he made during a CNBC interview.

Most recently, Trian and Disney traded tepid letters, with the former advocating for Peltz to replace Michael Froman on the Walt Disney Company’s Board of Directors. Disney followed up by announcing their April shareholders meeting, and they urging shareholders not to vote for Peltz. Neither letter was particularly persuasive. It seemed the battle was already fizzling out.

The latest development comes today, as Bob Iger sat down at the Walt Disney Company’s headquarters in Burbank, California for a wide-ranging interview covering succession planning, streaming strategies, restructuring, and his decision to return to the company.

For those curious, theme parks were not discussed at all, save for a passing mention that they’re very valuable to the company and a success of growth potential. No specifics, though. (I watched the entire thing live, and the only big ‘news’ to come out of the interview is Iger suggesting that it’s possible that they’re a seller of Hulu, rather than a buyer. Albeit indirectly, that could have big implications for the theme park business and Disney’s ability to make bigger investments.

During that interview, Iger was asked about the proxy fight and why he didn’t just offer Peltz a seat on the board to make the problem go away. Iger was a bit dismissive, turning the tables and saying that the question should be “why, not why not.” He contended that Peltz would not add value or a fresh perspective to Disney’s board, and didn’t have any ideas that the company wasn’t already implementing.

Iger said he only had so much time and energy, and that needed to be focusing on improving Disney’s performance, and not on a “distraction.” He further addressed the connection between Peltz and Marvel’s Ike Perlmutter, but declined to say that there was any bad blood between the two from Iger’s perspective. He did say that Perlmutter had wanted to fire Kevin Feiger, and Iger had intervened in 2015 to prevent that, which caught Ike’s ire.

In any case, shortly after the Iger interview ended, CNBC “Squawk on the Street” host Jim Cramer spoke with Trian Partners Founder Nelson Peltz over the phone for a brief reaction. In response, Peltz said that his father told him that “you can only win once” and that “this was a great the shareholders had won. All of Trian’s concerns had been addressed, and they were impressed by what they heard.

“Management at Disney now plans on doing everything that we wanted them to do.” As a result, Peltz wished Bob Iger, his management team, and the Walt Disney Company’s Board of Directors the very best. Peltz indicated that Trian would be watching and he’d be rooting for them, and that “the proxy fight is over.”

Jim Cramer also asked Peltz how much money he made on the gambit, to which Peltz chuckled and said, “who’s counting?! Everybody made money.” He also indicated that he’d like to go back to being friends with Bob Iger, saying that he’d like to. “I’ll pick up lunch or breakfast the next time, I promise.” He also said he’d definitely call Bob Iger to wish him happy birthday tomorrow, and would even send him a gift.

So it sounds like Peltz is a gracious loser, at least. Albeit a loser who has already made hundreds of millions of dollars given that he bought his 9.4 million shares when Disney’s share price was below $90, and it’s currently sitting around $115.

Ultimately, it seems like a couple of things happened to result in the proxy fight unraveling. First is that Disney did take Peltz’s complaints and suggestions to heart, even if the company denies that’s the case. As we previously indicated, it’s fairly undeniable that the abrupt announcements of 3 BIG Changes at Walt Disney World to Improve Guest Experience & Value and Good Changes Coming to Disneyland had nothing to do with Peltz. It would have to be a pretty big coincidence that that news dropped hours before Peltz launched his proxy fight.

To be sure, this is not entirely due to Peltz. D’Amaro and other leaders at Walt Disney World have been eager to improve guest satisfaction, but had their hands tied. Iger was acutely aware of this, expressed “alarm” at Walt Disney World price increases, and was concerned that Chapek was “killing the soul” of Disney. All of that is well-documented, and predates the Peltz proxy fight.

However, it’s impossible to dismiss the standoff with Trian and Peltz as playing zero role, especially given the timing of the aforementioned changes at the parks, Mark Parker’s elevation to Chairman, and establishment of the Succession Planning Committee. At minimum, “Restore the Magic” was an accelerant that has already fast-tracked plans that were previously in motion.

Second, it also seems like Peltz ‘shot his shot’ and made his best case at the beginning of the campaign, and his proxy fight ran out of gas as Iger resumed control, the stock price increased, and Iger had a performance on the earnings call that impressed analysts and investors. Against that backdrop, Peltz had a narrowing path to victory in the proxy fight.

It feels like Peltz was gearing up for a battle with the unpopular CEO Bob Chapek with Disney’s stock price under $90, a looming recession, and disillusioned fans and employees. Literally all of those circumstances are different now, and Peltz finally realized it. At the end of the day, I still think this benefitted fans in getting Disney leadership to reevaluated its approach to parks, and it’s not a huge shock to see the proxy battle end before the April 2023 shareholder meeting.

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Surprised that Peltz called off the proxy fight? What did you think about the “Restore the Magic” Campaign and Disney’s responses to it? In your view, which side has made the more compelling case…or have both been relatively weak? What about this week’s new filings–do you agree with our characterization of these as “languid letters” or do you think one side has a strong point? Think this fight will be beneficial for the company and fans at the end of the day, or is it already over? Optimistic that this will push Iger to finally get serious about choosing a successor or focus on improving guest satisfaction in the parks? Thoughts on anything else discussed here? Do you agree or disagree with our assessment? Note that neither Disney nor Peltz brought up politics or culture wars in their presentations; as such, all off-topic comments about either will be deleted.

14 Responses to “Disney’s Proxy Fight is Over”
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