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Wednesday, Feb 21, 2024

Disney: Warring Factions Woo Shareholder Votes

Call it the Battle of the White Cards versus the Blue and Green Cards. 

The Walt Disney Co. is encouraging shareholders to vote the white card in the proxy fight going on between the company and activist investors. 

The white card selects the 12 board of director nominees put up by Disney for re-election at the annual shareholder meeting that takes place on April 3.

In a Feb. 1 letter to shareholders, the board of the Burbank-based entertainment and media giant asked that they not vote for the candidates indicated on the blue card, from the Trian Fund Management, or the candidates on the green card, who are from Blackwells Capital LLC. 

“Please disregard and discard those cards,” the letter said. 

Trian is the private equity firm run by Nelson Peltz, who holds approximately $3 billion in Disney shares. In a letter to shareholders also sent on Feb.1, Peltz encouraged them to vote for him and Jay Rasulo, the former Disney chief financial officer, as new independent members of the board. 

Nelson Peltz

Rasulo owns about $600,000 in Disney shares. 

“Despite Disney’s enviable and unique position in media and entertainment, its stock price is half what it was less than three years ago, and Disney shareholders – like you and us – have collectively lost nearly $200 billion of our investment in that time,” Peltz’s letter said. “Disney’s recent creative efforts have disappointed its once-loyal customer base and have caused losses for shareholders.”

Blackwells, meanwhile, encouraged shareholders to vote for its own slate of board candidates – Jessica Schell, Craig Hatkoff and Leah Solivan – and to reject Peltz and Rasulo. 

Schell has extensive experience in the entertainment, technology and retail industries as an executive with Warner Brothers Discovery and NBC Universal. Hatkoff brings real estate expertise and some entertainment experience as well; he was a cofounder of the Tribeca Film Festival. Solivan, meanwhile, is a tech entrepreneur and venture capitalist and has led several successful funds that invest in consumer, software-as-a-service and infrastructure companies.

“In our view, only Blackwells’ highly qualified candidates are in a position to support Disney’s transformation efforts, adding expertise that is demonstrably lacking, while making sure the Disney Board doesn’t become a forum for personal grievances and reckless behavior,” the investment management firm’s release said. “Moreover, Disney’s preliminary proxy statement paints a picture of a board focused less on transforming the company and more on preventing contrarian viewpoints and expertise from entering the boardroom.”

Disney did not respond to a request from the Business Journal about whether it had any comment on the letters from Peltz and Blackwells.

Jason Aintabi, the founder and chief investment officer of Blackwells, said in the company’s release that the Disney board should meet with Blackwells’ three nominees “in order to promote the free-flowing exchange of ideas that comes with constructive collaboration.”

In its letter, the Disney board said that both the Trian and Blackwells slates of candidates under consideration lack the appropriate talent, skill and expertise to effectively support its ongoing efforts to drive profitable growth and shareholder value creation in the face of continuing industry-wide challenges.

“Your board believes that the attempts by the Trian Group and Blackwells are likely to derail Disney’s progress, as election of any of their less-qualified nominees would hinder the transformation efforts underway,” the board’s letter said.

Peltz stressed in his letter that Disney had lost its way.

“In our view, Disney’s strategic missteps and declining financial performance can be laid at the feet of its board, which we believe lacks focus, alignment and accountability,” Peltz wrote. 

The current board does not want Trian’s candidates inside the board room, perhaps out of a desire not to face hard questions and a focus on shareholder value, Peltz continued. 

The Disney board seeks to exclude the Trian candidates and appease shareholders with the appointment of two new, hand-selected directors who were chosen without shareholder input, he added.

Peltz was referring to the appointments of James P. Gorman, chief executive of Morgan Stanley, and Sir Jeremy Darroch, a veteran media executive and former group chief executive of Sky, as new directors.

In other Disney news, the company has entered into a deal with ESPN, FOX and Warner Bros. Discovery to form a new joint venture to develop, launch and operate a streaming sports bundle of linear networks and certain direct-to-consumer sports content and services. The new network will include games from Major League Baseball, the National Football League, and the National Basketball Association, as well as soccer, golf, hockey and auto racing. More details, including pricing, are forthcoming, according to Disney.

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