Disney won the proxy battle and its stock price fell.
walt disney (NYSE:DIS) fended off a challenge from activist investors as shareholders voted to seat all 12 of Disney’s nominees on its board. But investors did not look kindly on the news, at least initially, with the stock falling about 3% on Wednesday.
At least for now, it’s over a long-running proxy battle launched by Disney majority shareholder Trian Partners, which owns $3.5 billion in Disney stock, to secure a seat on the company’s board of directors. Trian has put forward two names for the Disney board election: Trian founder Nelson Peltz and former Disney CFO Jay Rasulo. Additionally, hedge fund Blackwells Capital, another Disney shareholder, submitted three additional board candidates, but all fell short.
“At Disney’s 2024 Annual Meeting of Shareholders today, Disney’s entire board of directors, comprised of 12 directors, appears to have been elected by a significant margin over Trian and Blackwells’ nominees,” Disney said in a statement Wednesday afternoon.
The final tally will not be official until later verified by an independent auditor.
The election was a vote of confidence in Disney CEO Bob Iger, who has been challenged for two years in a row by Peltz and Trian. Cast: Iger, Mary T. Barra, Safra A. Katz, Amy L. Chang, D. Jeremy Darroc, Caroline N. Everson, Michael B. G. Froman, James P. Gorman, Maria Elena Lagomascino, Calvin R. McDonald, Mark G. Parker, and Derica W. Rice were elected to the Board of Directors.
“I would like to thank our shareholders for their trust and confidence in our Board of Directors and management. Now that the distracting proxy contest is behind us, we are 100% focused on our most important priorities: growth and value creation for our shareholders and creative excellence for our consumers,” said Iger.
Trian had waged a proxy war leading up to last year’s meeting, but decided to call it off after Iger announced a restructuring plan that would cut $5.5 billion in costs and lay off 7,000 employees. But that plan didn’t go far enough, with Disney shares rising only 4% last year. So Peltz has started another proxy fight ahead of this year’s meeting.
In addition to cost-cutting, Trian has had issues with Disney’s succession plan, missteps in its streaming business and TV networks, the “strategically flawed” acquisition of 20th Century Fox and a lack of clarity about ESPN’s strategy after Iger first resigned in 2021. , concerns include lack of focus and accountability on the board, revenue difficulties, and underperforming share price compared to peers. Over the past five years through April 2, Disney stock’s average annual return was 1.4%.
Disney has refuted some of the claims, saying it is making progress on several fronts, including cutting costs, improving cash flow, increasing streaming profitability and announcing a new sports streaming platform to launch this fall. Disney also had a strong fourth quarter that beat expectations and called for 2024 revenue to rise 20% and free cash flow to double to $8 billion by the end of the year. As a result, the stock is up 31% year to date.
Trian boasts impact
Axios reported some results on Wednesday, but the note is not official and comes from the outlet’s sources. Axios said the largest portion of support came from retail investors, with 75% backing Disney’s candidate. It also said that Iger received 94% of the vote, while Peltz received about 30% of the vote. According to Axios, Lagomasino beat Rasulo by a roughly 5-1 margin.
“While we are disappointed with the results of this proxy contest, Trian greatly appreciates all of the support and dialogue with Disney stakeholders,” Trian executives said in a statement after the vote. “We are proud of the impact this company has had in refocusing on value creation and good governance. Since rejoining the company in late 2023, Disney has announced a number of new operating initiatives and capital improvement plans. The Board of Directors has been refreshed with two new directors. Over the past six months, Disney’s stock price has risen about 50% and is the best performer on the Dow Jones Industrial Average to date.”
Trian added, “I wish the best to all stakeholders in the company, including the Disney board and management team.” We will continue to monitor the company’s performance and focus on its continued success.”
Wednesday’s sell-off is likely a knee-jerk reaction to the headlines, but it doesn’t actually change Disney’s trajectory. Trian and Blackwells’ challenge may have failed, but it allowed the company to work harder in the direction it is currently heading. Trading at 26 times future earnings, Disney looks like a decent valuation, and Disney investors stand to benefit if the board and management can now execute on their plans.
