LOS ANGELES, Jan 17 (Reuters) – Walt Disney Co
on Tuesday defended its decision to deny Nelson Peltz a board
seat, saying the activist investor “lacked the skills and
experience” to help the media and entertainment giant.
The house of Mickey Mouse in a letter to shareholders also
underlined the company’s successes under Chief Executive Bob
Iger, who recently returned from retirement to lead the company
for a second time.
“Peltz does not understand Disney’s businesses and lacks the
skills and experience to assist the board in delivering
shareholder value in a rapidly shifting media ecosystem,” Disney
said.
The billionaire last week formally launched his bid for a
board seat to rescue the company from what he called a “crisis”
of overspending on the streaming business, the purchase of 21st
Century Fox and failed succession planning.
Peltz had an internal advocate, Marvel Entertainment
Chairman Isaac “Ike” Perlmutter, who asked that the activist
investor be added to Disney’s board on a half-dozen occasions,
according to Disney’s preliminary proxy statement and
accompanying materials filed with regulators. Perlmutter has
been pressing the issue since July 2022, contacting former CEO
Bob Chapek, director Safra Catz and other senior executives on
behalf of Peltz.
Peltz’s move is seen as a serious challenge to Iger and pits
one of the most popular executives in Hollywood against the
activist investor known for his work at consumer firms.
The billionaire investor told CNBC last week that Disney
should buy the remaining stake in Hulu it does not already own
or exit the streaming business. Disney has an agreement to
acquire Comcast Corp’s one-third interest in the Hulu
streaming service as soon as January 2024.
Disney also needs to boost capital expenditure at its parks
business, where it probably raised ticket prices “too hard,” he
said then.
DISNEY HITS BACK
In its filing Tuesday, Disney said it was already working to
improve profitability at the Disney+ streaming business that
Iger helped launch in 2019 and was rolling out broader
cost-cutting measures.
The company defended the acquisitions it made under the
since-returned CEO Iger, including for Pixar, Marvel and
Lucasfilm. It said they were transformative and enhanced the
companys value.
As early as July 11, 2022, Disney had been engaging in
conversations with Peltz, according to the preliminary proxy
filed on Tuesday with the U.S. Securities and Exchange
Commission. The activist expressed his support for then-CEO
Chapek, and presented himself as someone who could be helpful if
he joined the board.
Perlmutter, a Disney employee and shareholder, added his
voice to Peltz’s campaign to join the board, arguing at one
point that the activist could help the embattled Chapek
“solidify his position as CEO.” Without Peltz’s help, the Marvel
chairman warned, “former executives including Mr. Iger, would be
back at Disney.”
As Peltz and Perlmutter continued to press their case,
another activist was pounding on Disney’s door – Daniel Loeb,
chief executive officer of Third Point. In August, Loeb
contacted Chapek and Chief Financial Officer Christine McCarthy
to say he had invested in Disney and recommended changes. He
agreed to a standstill with the Sept. 23 appointment of an
independent director, Carolyn Everson.
Meanwhile, Peltz’s campaign for a board seat intensified. He
notified Chapek on Nov. 8 that he had acquired $500 million in
Disney stock, and planned to increase his stake to $1 billion.
Peltz said his Trian group intended to nominate a sale of
directors at the 2023 annual meeting unless he was named to the
board.
The activist continued to seek a directorship even after the
board fired Chapek on Nov. 20 and brought back Iger. In a video
call three days later, Peltz rejected Iger and McCarthy’s
suggestion that they find a mutually acceptable independent
director to serve on the board. Peltz said he would accept only
the addition of himself to the board, according to Disney’s
account.
Disney’s board elected not to offer Peltz a seat, citing
concerns about “introducing further disruption to Disney’s
management team nine days into Mr. Iger’s return.”
On Jan. 11, Peltz took matters into his own hands. His Trian
Fund Management issued a news release announcing its nominee to
the board, Peltz, setting in motion the proxy battle.
Trian Fund Management, which owns a 0.5% stake, or roughly
$900 million in Disney, declined to comment on Tuesday.
Unless Peltz settles with Disney, investors will vote this
year on whether he should sit on the company’s board. Last year,
the annual shareholder meeting was held on March 9.
(Reporting by Dawn Chmielewski in Los Angeles and Eva Mathews
and Aditya Soni in Bengaluru
Editing by Shinjini Ganguli and Matthew Lewis)