The Walt Disney Co. has come out swinging against activist shareholder Nelson Peltz's campaign to join the company's board of directors, saying the billionaire lacks a basic understanding of Disney's business and has offered no strategic ideas.
Disney, in a shareholder presentation published Tuesday, blasted Peltz and defended the leadership of Chief Executive Bob Iger and his landmark acquisitions, including 21st Century Fox, arguing that such deals transformed the company.
At the same time, Disney revealed that Peltz's entreaties to the company had the backing of a high profile and sharp-elbowed personality within the firm: Marvel Entertainment Chairman Isaac "Ike" Perlmutter.
"Nelson Peltz does not understand Disney's business and lacks the skills and expertise to assist the board in delivering shareholder value in a rapidly shifting media ecosystem," Disney said in its presentation. "Peltz has no track record in large cap media or tech, no solutions to offer for the evolving media landscape."
Peltz, 80, has been meeting with Disney executives and board members for months in order to gain a seat on the Burbank entertainment giant's board of directors, but his overtures have been rebuffed. He's now trying to get himself elected by Disney shareholders, who will vote at the company's upcoming annual meeting. A date has not been announced.
Peltz, known for proxy fights with companies including Procter & Gamble, last week disclosed his effort to gain a board seat and pressure Disney to correct what he calls "self-inflicted" problems at the company amid its poor stock performance. He listed his grievances on a website called RestoretheMagic.com.
Chiefly, he criticized Disney for a streaming strategy that has struggled to reach profitability, a poor track record at succession planning and a $71.3-billion acquisition of Fox assets that saddled the firm with substantial debt. He said he wants Disney to go back to paying shareholder dividends by fiscal 2025.
Peltz, who runs the New York investment firm Trian Partners, has amassed 9.4 million shares of Disney's stock, worth about $900 million.
Disney preempted Peltz's fight on Wednesday by naming former Nike Chief Executive Mark Parker as its next chairman, replacing veteran business leader Susan Arnold, who is termed out after 15 years on the board. Disney recommended that investors vote against Peltz and instead support its own 11 nominees.
In its Tuesday rebuke to Peltz, Disney fired back at suggestions that Iger overpaid Rupert Murdoch for Fox, touting the franchises and executive talent that joined the company through the 2019 deal. Those include James Cameron's "Avatar" movies, X-Men, "The Simpsons," control of Hulu, Oscar-winning specialty film arm Searchlight and TV executives Dana Walden and John Landgraf, all of which better positioned Disney for the industry's shift to a direct-to-consumer business model.
Disney+, launched in November 2019, has grown rapidly, making Disney one of the most formidable rivals to Netflix. Disney+ has 164.2 million subscribers. Netflix has 223 million. However, the streaming business has increasingly come under question from Wall Street media analysts who are skeptical of the degree to which subscription revenues can replace cash lost from traditional television and movies.
Disney noted that Iger's previous acquisitions of Pixar, Marvel and Lucasfilm have all proved doubters wrong, though those three deals were much smaller than the purchase of Fox.
Moreover, Disney challenged Peltz's analysis of the company's performance, saying that the company delivered shareholder returns of 554% during Iger's 15-year reign that began in 2005, outpacing the S&P 500 and rivals in the legacy media sector. Recent struggles can be partly attributed to the COVID-19 pandemic, which hobbled the company's movie studio and parks business and accelerated the industry's streaming pivot.
Peltz began reaching out to Disney executives in July, starting with a lunch with then-Chief Executive Bob Chapek at Disneyland Paris, according to regulatory filings.
According to Disney's timeline, Peltz's effort was supported by Perlmutter, who wanted the company to consider adding Peltz to the board. Just days after the initial meeting, Perlmutter called Chapek, Disney Chief Financial Officer Christine McCarthy and board member Safra Catz to advocate for Peltz's inclusion.
Perlmutter, according to Disney, said having Peltz in the fold would "help Mr. Chapek counter recent headwinds he had faced, solidify his position as CEO, and preempt any other potential shareholder nominations of director nominees."
According to Disney's filing, Perlmutter said that "without Mr. Peltz there, former executives including Mr. Iger, would be back at Disney." Perlmutter, once Marvel's chief executive, is a major Disney shareholder. Perlmutter's role at Marvel was diminished in 2015 when Disney had Marvel Studios head Kevin Feige, the architect of Marvel's lucrative film strategy, report to Disney studio boss Alan Horn instead of Perlmutter.
But Chapek's position was far from solid. The board fired Chapek in November and brought back Iger as chief executive for a two-year term. Parker is expected to chair a board committee dedicated to finding a successor for Iger, considering both internal and external candidates.
Since his return, Iger has made a number of changes at Disney, including a restructuring effort in the name of restoring power to the company's creative leaders. Layoffs are expected amid a broader effort to cut costs.
Disney confirmed that its board had met with Peltz on Jan. 10 for a presentation of his analysis of Disney's business, but found it wanting. Peltz, in his version of events, said he was offered a role as a board observer, though not as a voting member. The company disputed Peltz's contention, saying he had actually been invited into more of an information-sharing arrangement.
"Mr. Peltz had not, and the Trian Group representatives at the meeting had not, actually presented a single strategic idea for Disney, that their assessment of Disney seemed oblivious to the secular change that had been ongoing in the media industry, as well as the impact of the pandemic on each part of the Company's business from production, to exhibition, to leisure travel," Disney said in a proxy statement.
