The end is nigh for the great Disney-Nelson Peltz proxy battle

Walt Disney Co.’s dramatic battle with billionaire shareholder Nelson Peltz and his firm, Trian Fund Management, comes to a head this week.

It’s the most significant challenge to Bob Iger’s power during his time at the Burbank entertainment giant, and the biggest show of Disney shareholder discontent since the end of the Michael Eisner era. The closely watched dispute has created headaches for Disney’s leadership during much of Iger’s tenure after he returned as the Mouse House’s chief executive in November 2022.

What’s happening?

On Wednesday, Disney will tally and announce the results of the shareholder vote that will determine the makeup of its board of directors. The company has strenuously encouraged shareholders to approve its full 12-person slate of nominees. Peltz’s Trian has put forth two candidates: Peltz himself and Jay Rasulo, a former Disney chief financial officer. Another activist investor, Blackwells Capital, has named three contenders.

What time is this happening?

The webcast of Disney’s shareholder meeting begins at 10 a.m. (Pacific time) Wednesday.

What’s at stake?

In literal terms, at least two board seats. Trian has encouraged Disney investors to vote for Peltz and Rasulo and to withhold their support of a pair of current Disney directors: Maria Elena Lagomasino and Michael B.G. Froman.

Iger’s position as CEO and board member is not being openly challenged. Nonetheless, as my colleague Meg James writes, the election has effectively become a referendum on Iger’s leadership and his strategy for turning around the company after a period of well-documented struggles.

Who are Disney’s shareholders?

A mix of institutional investors (including funds of the mutual, index, pension and hedge variety), plus Disney executives and, importantly, a significant number of individual (or “retail”) stockholders, who, because of Disney’s place in pop culture, have more sway than at many other corporate giants. Some of Disney’s shareholders are children who’ve been gifted stock by relatives.

According to FactSet, Disney’s shareholder breakdown is 67% institutional and 33% “unknown” (including individuals). The heavyweights include Vanguard and Morgan Stanley.

Who’s on Team Iger?

Multiple bigwigs have voiced support for Iger, including but not limited to “Star Wars” creator George Lucas; Emerson Collective founder Laurene Powell Jobs, who is the widow of Pixar and Apple co-founder Steve Jobs; JPMorgan Chase CEO Jamie Dimon; Eisner, the former Disney CEO; shareholder advisory firm Glass Lewis; Mutual fund T. Rowe Price and asset manager BlackRock; and the grandchildren of Walt and Roy Disney, including Abigail Disney, a longtime critic of Disney’s executive compensation practices.

What about Team Peltz?

Other major names have backed Trian, such as: Ike Perlmutter, former CEO of Marvel Entertainment; ISS, a key institutional shareholder advisory firm; Egan-Jones, a ratings agency ; CalPERS, which holds around 6.6 million Disney shares.

What are Peltz’s main arguments?

Trian, in its communications, including a more than 130-page white paper, has leveled numerous and varied criticisms at Disney’s board, which Peltz broadly views as having been too complacent amid major shifts in the entertainment industry. As such, Peltz & Co. point out, Disney’s stock has underperformed the S&P 500 during a five-year period. The group tasked with overseeing the company, Peltz and his supporters say, needs fresh eyes.

Trian’s big contentions include that Disney erred in paying $71 billion for 21st Century Fox, doubling down on the declining linear TV networks business; entered the streaming sector too late, lost too much money and needs a plan to achieve “Netflix-like” profit margins; lost its way with film, judging by the performance of recent Marvel and Pixar movies; bungled succession planning, as seen with Bob Chapek’s short tenure as Iger’s replacement CEO; and lacks a coherent strategy for the future of ESPN.

What is Disney’s case?

Disney says many of Trian’s claims are wildly misleading and that the majority of Peltz’s suggestions are things that the company is either already doing or had previously considered. The company has released blistering letters and videos to investors, including a political campaign-style ad, arguing that Peltz’s campaign is tainted by Perlmutter’s long-running feud with Iger and that both the former Marvel boss and Rasulo are disgruntled former employees.

Moreover, Iger has spent the bulk of his second term getting Disney back on track, and shareholders have rewarded his efforts. The stock is up more than 30% so far this year. Peltz has taken credit for some of the stock surge, an assertion that Disney vigorously disputes. The shares spiked after a strong February earnings report that coincided with several splashy announcements, including Taylor Swift’s Eras Tour movie coming to Disney+ and a $1.5 billion investment in “Fortnite” maker Epic Games.

How will this end?

It’s unclear. Until recently, Disney’s stock gains had made it seem as if the wind had gone out of Peltz’s sails. But that was before ISS, which carries considerable weight among big investment funds, put its stamp of approval on Peltz (though not Rasulo), citing the company’s flawed track record with succession planning. We’ll find out soon enough on Wednesday.

Stuff we wrote

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The docket:

Number of the week

It’s about a week before CinemaCon kicks off in Las Vegas, where the movie theater operators and studios will gather to slap each other on the back and celebrate the wonders of the big screen.

There’s been at least some reason for cheer lately, despite predictions that 2024 will be a rough year at the box office thanks to the lack of big theatrical releases after six months of labor strikes overhauled studios’ calendars.

Easter weekend’s big release, “Godzilla x Kong: The New Empire,” exceeded expectations with estimated domestic ticket sales of $80 million, and delivered the second best opening of the year behind “Dune: Part Two.” Including international business, the kaiju smash-em-up scored $194 million, with premium formats including Imax and Dolby Cinema accounting for 48% of revenue.

The Adam Wingard-directed tentpole carries an estimated $135-million production budget, which doesn’t include marketing costs.

With the “Dune” sequel ($252 million, domestically) and DreamWorks Animation’s “Kung Fu Panda 4” ($151 million) also generating business, the first quarter of the year wasn’t quite as bad as analysts had feared it would be. Movies collected $1.6 billion in the U.S. and Canada through March, down 6% from the same period of time last year. Roth MKM analyst Eric Handler had predicted a steeper decline of 9%.

Even so, all is not well in the film exhibition industry.

AMC Theatres’ stock dropped more than 14% on Thursday after the Leawood, Kan.-based company disclosed that it might sell up to $250 million in stock to bolster its finances after a period of weak box office, some of which can be blamed on Hollywood’s twin strikes. It’s the latest move by heavily-indebted AMC to steady itself following its meme-stock rollercoaster ride.

The company’s shares are down more than 90% from the same time last year.

Following the pandemic closures, some theaters shut down for good, while others teetered. The effects are still rippling out.

Deadline has reported that popular Austin-based chain Alamo Drafthouse was up for sale, less than three years after emerging from Chapter 11 bankruptcy. It wasn’t clear if there were any bids or what the asking price might be. Regal’s U.K.-based owner Cineworld, the world’s second-largest chain after AMC, exited its own bankruptcy last year.

Despite the optimism sparked by recent hits, the theatrical film industry remains challenged. The slate for the next three months is thin compared to last year, though “The Fall Guy,” a new “Planet of the Apes” flick and “Furiosa” hold some promise. The issue is not just a shortage of films in the marketplace but also long-term shifts in audience behavior and preferences.

The latest monster mashup and the “Dune” follow-up show that audiences will still shell out for well-made, correctly marketed event films, and even pay a premium for the best experience. The problem for theaters isn’t as much about the demand for movies as many had feared it was in the immediate wake of the pandemic. Having healthy theater companies, though, remains a separate question.

Shares of No. 3 chain Cinemark, which has benefited from a much stronger balance sheet than its closest rivals, are up more than 20% from a year ago.

Best of the web

— Evan Gershkovich’s stolen year in a Russian jail. (Wall Street Journal)

— Streaming has rediscovered the TV procedural. (Vulture)

— U.S. recorded music revenue rose 8% in 2023 as streaming growth remained steady. (Billboard)

— Will country music welcome Beyoncé? That’s the wrong question. (New York Times)

— How the Atlantic, backed by Laurene Powell Jobs, went from broke to profitable in three years. (WSJ)

Finally …

Hey nerds, check out Mikael Wood’s oral history of Weezer’s Blue Album. Whoa-whoa-ah-whoaaaaaa.