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Disney wins proxy battle against activist investor Nelson Peltz, as shareholders re-elect entire board


(L to R) Bob Iger, CEO and Chairman of The Walt Disney Company, and Mickey Mouse look on before ringing the opening bell at the New York Stock Exchange (NYSE) on November 27, 2017 in New York.

Drew Angerer | Getty Images

Disney Shareholders re-elected the media conglomerate’s entire board of directors on Wednesday, preliminary results showed, handing a crushing defeat to activist Nelson Peltz and former Marvel CEO Ike Perlmutter, both agitated for change at one of the most renowned companies in America.

The widely anticipated victory caps a combative, months-long process and vindicates the board’s decisions, from the decision to bring back CEO Bob Iger to his efforts to reinvigorate the $223 billion media company. Trian Partners, led by Peltz, wanted to oust two directors, Maria Elena Lagomasino and Michael Froman, citing persistent underperformance of its shares, a failed succession processand billions in misdirected investments.

Peltz lost to Lagomasino by a 2-to-1 margin, a person familiar with the matter said. Retail voters overwhelmingly supported Disney, this person added, helping give Iger 94% of the overall vote. Former Disney CFO Jay Rasulo, who Trian also named, lost to Lagomasino by an even larger margin of 5-1. The person called it Peltz’s largest loss ever.

In percentage terms, director voting turnout was in the mid-60s, another person familiar with the matter said. In 2023, approximately 63% of Disney shareholders have voted.

A second campaigner, Blackwells, also failed to win board seats in his own long-running campaign.

“I would like to thank our shareholders for their confidence in our board of directors and management. With the distracting proxy contest now behind us, we look forward to focusing 100% of our attention on our most important priorities: growth and value creation for our shareholders and creative excellence for our consumers,” said Iger in a press release.

Disney has poured significant resources into the proxy fight. The company tapped its founding family, Star Wars creator George Lucas, JP Morgan CEO Jamie Dimon and Laurene Powell Jobs, the widow of Pixar and Apple CEO Steve Jobs.

Although Peltz will not be on Disney’s board, he and his company have claimed some of the credit for the rebound in the company’s stock.

“While we are disappointed with the outcome of this proxy contest, Trian greatly appreciates all of the support and dialogue we have had with Disney stakeholders. We are proud of the impact we have had in refocusing this company on value creation and good governance. Trian said in a statement.

The company also spent about $40 million fighting Peltz. The full-court press worked. Disney’s two largest shareholders, Vanguard and BlackRock, moved to support management in the final days leading up to Wednesday’s meeting.

Ultimately, activists failed to convince enough individual or institutional shareholders that he had a meaningful plan to fix the Mouse House. While Peltz’s candidacy enjoyed significant support from proxy advisors and small institutional investors, shareholders were less convinced by Rasulo.

Even though his choices failed to win board seats, Blackwells was pleased that Peltz was not elected.

“Blackwells’ primary goal has been accomplished: keeping Nelson Peltz out of the Disney boardroom,” Blackwells said in a statement. “The company would have benefited from the hard work of any of our nominees over the coming years to advance this iconic business, but we respect the wishes of shareholders and the outcome.”

Jay Rasulo and Nelson Peltz.

Patrick T. Fallon | Bloomberg | Getty Images | Adam Jeffery | CNBC

Peltz, who doesn’t like to be called an activist but has orchestrated successful campaigns at iconic companies like PepsiCo, P&G and Wendy’s, controls a $3.98 billion stake in Disney, or about 2 percent of total assets. shares outstanding. Most of these shares belong to Perlmutter.

With Disney shares up nearly 50% since Peltz’s campaign began, Trian and Perlmutter have gained big despite losing on the board. Peltz is partly responsible for about $25 million spent on the fight, a small sum compared to the paper winnings in the stake he controls.

As it moves past the battle with Peltz, Disney still faces unprecedented challenges. ESPN has been losing subscribers for years, raising questions about whether it’s ready to take on streaming newcomers. Disney’s streaming business has spent billions to gain subscribers and is losing money as it tries to catch up to market leader Netflix.

Perhaps more importantly, the company is looking for a successor to Iger for the second time in five years. Disney’s botched succession, where Iger’s hand-picked replacement, Bob Chapek, was ousted just two years into his tenure, was a key point Trian used against the company.

“Thank you for your confidence in the management of the Disney project and in the ambitious strategy we are implementing in all our activities to build the future,” Iger said after the preliminary vote was announced. “Now that this distracting proxy fight is behind us, we are here to focus 100% of our attention on our most important priorities, growth and value creation for our shareholders and creative excellence for our consumers. Thank you again for your support and continued investment in this area.

Nelson Peltz, founding partner and CEO of Trian Fund Management, speaks with CNBC’s Andrew Ross Sorkin on July 17, 2013 in New York.

Heidi Gutman | CNBC, NBCU photo bank, NBCUniversal via Getty Images

There is evidence that key proxy advisors agreed with Peltz’s argument that the board was ill-equipped to undertake a second research process.

The shareholder advisory firms Glass Lewis and The ISS both noted the succession questions in their recommendations to investors. Glass Lewis sided with Disney and affirmed Iger’s return, coupled with appointments this year from Morgan Stanley executive chairman James Gorman and former Sky CEO Jeremy Darroch on the board gave the company “an adequate opportunity to launch a more credible succession program and to develop, communicate and execute several key initiatives that appear reasonably to target the Disney’s recognized operational and financial weaknesses.

Investors rallied behind Disney in February after the company made a series of major announcements during its earnings conference call, including that it had Landed Exclusive Streaming Rights to Taylor Swift’s Eras Tour Concert Film, a strategic investment of $1.5 billion in Epic Games as well as a flagship ESPN streaming service.

Peltz called the series of announcements a “spaghetti against the wall” type plan intended to “distract shareholders”.

Disney shares have surged 23% since Disney’s first-quarter financial results were released in early February.

Disclosure: Sky News is owned by Comcast, the parent company of CNBC.

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