Nelson Peltz Slams Disney, From 2019 Fox Deal To Planned Sports Streaming JV, As Proxy Battle Rages

Jill Goldsmith
·3 min read
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As Disney’s April 3 shareholder showdown approaches, activist Nelson Peltz has released a more detailed set of arguments against the company’s board of directors, which he calls the “root cause of underperformance” at Disney.

In a series of graphs and bullet points coming to about 133 pages, the Trian Partner founder attempts to build a case for Disney shareholders to elect him and former Disney executive Jay Rasulo to the board, displacing two Disney nominees in the process.

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“We believe the Board suffers from a culture that impedes effective oversight. The Directors, in our view, lack focus, alignment and accountability, causing the Board to fail at fulfilling its primary responsibilities,” wrote the activist investor, claiming the new additions would enhance corporate governance and accountability, accelerate media profitably as it reviews Disney’s “creative engine” and clarify its strategic focus.

The company’s stock has lagged and profits challenged, like many of its media peers. But, says Peltz, industry disruption “does not absolve Disney’s board for poor performance – it’s the board’s job to look over the horizon.”

He singled out Disney’s $71 billion acquisition of Fox in 2019 as “strategically flawed” and stressing the balance sheet. He called new strategic announcements “half baked,” including a sports streaming JV with Fox and Warner Bros. Discovery. There are no details yet of the initiative announced last month.

From a governance perspective, Trian said Disney has overpaid its top executives, including CEO Bob Iger, and that succession is messy. “The Succession Planning Committee is composed of 3 out of 4 Directors who botched the last succession … its only “accomplishment” to date was to extend Mr. Iger’s contract for a 6th time just ~8 months in.”

Trian is asking shareholders votes for Peltz and Rasulo instead of directors Maria Elena Lagomasino and Michael Froman.

Disney has said that neither Trian nor Rasulo would be an effective director and has been actively lobbying shareholders to back its slate. Last week, family members of Walt Disney came out in support of Iger and the current board.

Trian says Disney’s set of assets make it the most advantaged media company but its movies are a struggling brand, streaming still loses money and it needs to move more aggressively in parks, especially with Universal opening new theme park in Orlando next year.

If elected, Trian said, Peltz and Rasulo will propose a number of  reviews — of the organizational structure, of studios and state of creatives and of studio operations and culture.

Trian believes “there is an opportunity to find strategic partners for all or some of Disney’s non-sports linear assets to maximize value of linear while improving Disney’s strategic focus and growth profile.” And it is “skeptical that a flagship ESPN DTC service is a viable business model given rising sports programming costs and the consumption patterns of sports fans.”

The company fretted that Disney has had “about three hours total of engagement with Trian” including two meetings and a board presentation last year followed by a meeting with Bob Iger — after which Disney named two others directors.

“We were allotted just 45 minutes, not a single nonmanagement board member attended in-person, and not one substantive question was asked by a nonmanagement director,” Trian said.

Another fund, Blackwells Capital, has nominated its three other candidates of its own to the board. Disney, Trian and Blackwells have all been inundating shareholders with instructions on how to vote.

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