The Disney-Peltz 'Management Dispute' Kicks Off... Proxy Battle at the Shareholders' Meeting

Wall Street Activist Investor Peltz Declares 'Proxy Fight'

Wall Street activist hedge fund Trian Fund has declared a 'proxy fight' against Walt Disney, which is facing ongoing management difficulties. Disney, suffering from chronic underperformance in its core business, deteriorating financial structure, and a decline in stock price, is now confronted with a new crisis: a battle for control with a Wall Street corporate raider.

According to the Wall Street Journal (WSJ) and others on the 30th (local time), Nelson Peltz, CEO of Trian Fund, stated in a press release that "Disney's stock price has underperformed compared to its peers during the current management's tenure," and announced that they will engage in a proxy fight against Disney. Peltz explained that although he had discussions with Disney CEO Bob Iger and the board, his request for board seats was not accepted.

Peltz's declaration came just one day after Disney announced the appointment of two new board members: James Gorman, CEO of Morgan Stanley, and Jeremy Darroch, former CEO of Sky. Peltz acknowledged that the addition of new board members was "progress under the current circumstances," but argued that it would not restore investors' confidence in the company. According to CNBC citing sources, Peltz aims to secure at least two seats on Disney's board.

A proxy fight is a strategy to secure voting rights at the shareholders' meeting by obtaining proxies from a majority of shareholders, used as a means to wrest control from the existing management. Foreign media reported that Disney's battle for control is expected to be decided at the next shareholders' meeting. The date for Disney's next shareholders' meeting has not yet been set.

[Image source=Reuters Yonhap News]

The conflict between Peltz and Disney dates back to January this year. At that time, Peltz criticized Disney for worsening its financial structure by overspending on the 2019 acquisition of 20th Century Fox and for damaging shareholder value through undisciplined management, including struggles in the next-generation business of online video streaming services (OTT). He demanded board seats and cost reductions.

Disney accepted Peltz's demands and announced a high-intensity restructuring and cost-cutting plan in February, leading Peltz to withdraw his request for a board seat. However, as underperformance in core businesses continued and there was no sign of financial improvement, Nelson expanded his stake and renewed pressure on management.

Seeking a seat on the board, Peltz had earlier acquired a 0.5% stake in Disney (worth approximately $900 million) and recently increased his stake to 1.8% (34 million shares as of November). WSJ reported that most of this stake was transferred by Isaac Perlmutter, former chairman of Marvel Entertainment. Perlmutter, who was instrumental in growing Marvel, became Disney's largest individual shareholder after selling Marvel to Disney for $4 billion (about 5.2 trillion KRW) in 2009, but was dismissed in March after conflicts with CEO Iger.

Starting with the 'Mickey Mouse' character, Disney grew into a traditional media giant encompassing animation, movies, music, and broadcasting. However, amid the paradigm shift brought by the rise of the OTT industry, Disney has struggled to gain the upper hand, with years of declining performance, worsening financials, and falling stock prices. Disney's stock closed at $92.69 on the day, more than halving from its peak of $197.16 in March 2021.

This content was produced with the assistance of AI translation services.