Disney steels for April 3 shareholder showdown with activist investors

By Jon Swartz

Rest assured, Walt Disney Co.'s annual shareholders meeting next week will not be the happiest place on earth.

Confrontation, allegations and conflagrations will be the theme when Disney (DIS) offers its slate of board members amid internecine corporate warfare with two activist investor groups.

On Wednesday, advisory firm Egan-Jones escalated tensions after it recommended shareholders dump two longtime Disney board members - Maria Elena Lagomasino and Michael B.G. Froman - to elect billionaire Nelson Peltz and his running mate, former Disney chief financial officer Jay Rasulo.

Last week, the influential Institutional Shareholder Services Inc. urged Disney investors to back Peltz but withheld an endorsement for Rasulo.

Some investors casting votes ahead of the meeting, including Neuberger Berman, have decided to support the nominees of Peltz's hedge fund, according to a Wall Street Journal report on Thursday. They said they are grappling with whether Disney's board is capable of choosing a strong successor to Iger, who replaced Bob Chapek who was forced out after just two years.

Major proxy advisory firm Glass Lewis vouched for Disney's slate of 12 director nominees, spurning both Peltz and Rasulo as well as three candidates running on a competing slate from Blackwells Capital.

The contentious proxy campaign has created nonstop headaches (and distractions) for Disney Chief Executive Bob Iger since he returned in late 2022 to restructure the company.

Disney countered earlier this week with words of praise for Iger from industry luminaries such as director George Lucas, JP Morgan Chase & Co. (JPM) CEO Jamie Dimon, former Disney CEO Michael Eisner, and ValueAct Capital co-CEO Mason Morfit.

"Creating magic is not for amateurs. When I sold Lucasfilm just over a decade ago, I was delighted to become a Disney shareholder because of my long-time admiration for its iconic brand and Bob Iger's leadership," Lucas said in a statement.

What Disney faces next week what is increasingly an issue for companies bedeviled by investor insurrectionists.

Last year, more U.S. companies (23.4%) identified activism as a risk in their disclosures than in 2022 (21.4%), according to a survey of Russell 3000 companies by Diligent Market Intelligence.

While Anthony Forcione, vice president and portfolio manager at Rockland Trust, which owns some Disney shares, believes Iger's plan is finally coming to fruition with a focus on profitability for Disney+ streaming and cost cutting, others aren't so sure.

"This is a biggie," Michel Levin, an independent activist investor and adviser, said in an interview. "They haven't done anything bad to Disney that Disney hasn't done to itself."

"This is a critique of a board that let Iger do whatever he wants," Levin said. "It's been the lack of a hit, streaming losses, parks performance, and governance in how the board works. Peltz can hold his own in taking on Iger."

-Jon Swartz

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