Nelson Peltz Demands Seat on Disney Board. Again.
“Those who do not learn from history are doomed to repeat it.”
At The Walt Disney Company, history is definitely repeating itself, as Nelson Peltz has returned to wreak havoc.
The activist investor has once again demanded a seat on Disney’s Board of Directors. In fact, he’s expecting more than one this time.
Here’s what just happened and what it means for Disney.
Déjà Vu All over Again
A lot of this should sound familiar to you, as we just went through the same thing earlier this year.
I can back up this statement with a fascinating MickeyBlog note. During the first five years of MickeyBlog, we mentioned Nelson Peltz exactly once.
At the time, the hedge fund billionaire wasn’t even the focus of a story. He hosted a 2020 fundraising event that then-Marvel executive Isaac Perlmutter attended.
Beyond that, we had no reason to discuss the businessperson. Then, everything changed toward the end of 2022, when we talked about him more than 35 times.
As we later learned by retracing Peltz’s steps last year, the investor recognized a buying opportunity at Disney.
Peltz instructed his company, Trian Partners, to purchase $800 million in Disney stock.
Along the way, Peltz leveraged his friendship with Perlmutter to connect with then-Disney CEO Bob Chapek.
Peltz’s goal every step of the way was to gain influence at Disney for a combination of financial and political purposes.
A more savvy, experienced CEO would have sensed the danger. It speaks volumes about Chapek that he did not.
Instead, Chapek warmly welcomed Peltz’s advice, partially because he knew that the billionaire wasn’t aligned with Bob Iger.
The infighting between Iger and Chapek drove much of the behind-the-scenes drama at Disney during the pandemic.
Peltz employed Littlefinger’s Game of Thrones logic, “Chaos is a ladder,” to infiltrate Disney.
Had everything broken right, Peltz would have pushed his way on Disney’s Board, gained more power over additional board seats, and claimed partial control of the company’s future.
Disney’s Board identified Peltz as a threat, especially in tandem with Perlmutter, who coveted more control over his old company, Marvel.
Not coincidentally, Peltz’s machinations triggered a series of events that led to Chapek’s firing and Iger’s return.
Return of the King
With Iger back in the fold, Disney’s situation no longer seemed as perilous.
Wall Street investors had nervously watched Disney under Chapek and worried the company was trending the wrong way.
Peltz, who had no experience with digital media – or any other kind of entertainment media – tried to impose his will.
Specifically, the billionaire demanded that Trian gain a seat on Disney’s Board.
Something like this had already happened in 2022 when a different activist investor, Dan Loeb of Third Point, earned a spot for his company.
Carolyn Everson participates on Disney’s Board for this reason. She’s Loeb’s eyes and ears at Disney.
Peltz wanted something similar, but Disney’s Board wouldn’t hear of it. Their logic was ironclad, too.
The Disney executives felt strongly that Peltz held no useful experience for the company’s future goals.
While Loeb had presented ideas to improve Disney’s market position, Peltz had earned his money in manufacturing.
Disney’s Board didn’t believe the guy who made ketchup bottles could help much with the future of Disney+ and Hulu.
Unfortunately, that person held plenty of Disney stock. He expected a return on his sizable investment, too.
Peltz demanded cost-cutting measures, including layoffs and a reassessment of streaming services, as Direct-to-Consumer was losing a fortune at the time.
Iger, ever the strategist, met some of Peltz’s demands as a kind of method to bribe the billionaire from needing a board seat.
When all this transpired, I described the fallout from the move as Iger settling all family business.
Iger humorously used the layoffs Peltz requested as an excuse to fire Perlmutter, Peltz’s accomplice.
At the time, Iger appeared to have pulled off a flawless victory, with Peltz and Perlmutter slinking away in defeat. But now…
Peltz Rises from the Ashes
I guess Iger should have used a wooden stake or a silver bullet against Peltz, who has risen from the dead.
That’s the thing about old billionaires. They don’t take losses well, and they carry grudges. Peltz has clearly done that.
Late on Sunday evening, October 9th, the Wall Street Journal dropped a bombshell, one that seemed orchestrated to do maximum damage to Disney.
With the company’s stock approaching ten-year-lows, Peltz gradually upped his stake to $2.5 billion.
Yes, Peltz controls three times as much Disney stock as he held when he made trouble last fall.
According to the Wall Street Journal, Trian will “request multiple seats—including one for Peltz, according to people familiar with the matter.”
I’m guessing the people familiar with the matter are Trian executives and possibly even Peltz and/or Perlmutter.
Here’s the essential part of the report: “If the company says no, Trian could nominate directors that would be voted on at Disney’s annual meeting next spring.”
That’s a polite way of saying that if Disney and Iger don’t meet Peltz’s demands, Trian will file the paperwork in December/January to take this matter to a shareholder vote.
That vote will occur in March or possibly April. As a reminder, Disney delayed the 2023 Shareholder Meeting until April to stall for time and fight off Peltz.
The billionaire dropped his early 2023 bid because Disney stock improved from the $80s to a 2023 high of $113.
At the close of business on Friday, October 6th, Disney stock was trading at $82.94 and had briefly fallen into the $70s earlier in the week.
Iger’s previous moves had bought Peltz’s silence. Now that Disney stock is struggling again, Peltz is turning up the heat.
What Happens Next?
Here’s the number that matters most. Trian sold a significant amount of Disney stock after Iger’s moves.
On Wall Street, that’s a practice known as profit-taking. With shares trading 30 percent higher, Trian sold high, which appears to have been the smart move.
Once the company’s stock went into freefall, Trian upped its stake from 6.4 million to a whopping 30 million shares.
Previously, one of Trian’s most significant asks was that Disney bring back its shareholder dividend.
Disney recently stated that it’s on track to do so. With the benefit of hindsight, that sounds like the company signaling to Trian to back off.
By restoring the dividend, Disney would be paying Trian a quarterly amount as a reward for all those shares, thereby providing a return on investment.
That money might not be enough for Peltz, though. Previously, he’d wanted his son on Disney’s Board.
Now, Peltz apparently envisions a scenario wherein he and his son both sit on Disney’s Board and gain influence over the composition of the group.
Earlier this year, Iger and Disney’s new Board Chairman, Mark Parker, sounded and acted quite emphatic that Peltz wasn’t a fit with Disney.
Has that opinion changed after a year of struggles? The answer is probably no.
However, there’s no denying the fact that Disney’s position is more precarious in October 2023 than it had been during the first quarter.
At the time, Peltz accepted defeat and backed out semi-gracefully. He’s now had half a year to stew over that loss and may be ready for round two.
Recent Disney history is repeating itself, whether we like it or not.
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