Iger on course to defeat Peltz in Disney board contest

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Disney looks to have staved off a challenge to its board from activist investor Nelson Peltz, handing a victory to chief executive Bob Iger and ending one of the most expensive and closely watched boardroom battles in history. 

The entertainment giant has received enough support from shareholders to defeat Peltz in his bid for a board seat, according to two people familiar with the matter, with large investors including Vanguard and BlackRock backing Disney. 

All 12 of Disney’s nominees are set to be elected to the board, these people said, in a bruising loss for Peltz who announced in October he would renew his proxy fight against the company, and for Blackwells Capital, another activist that put forth three nominees.

Peltz’s Trian Partners had called on shareholders to put him and former Disney executive Jay Rasulo on the board and to deny seats to two current Disney directors: Michael Froman and Maria Lagomasino. Disney is set to announce the results at its annual meeting on Wednesday.

While Peltz did not seek to oust Iger, the fiery contest has resembled a referendum on the CEO’s ability to turn around Disney’s fortunes. The veteran activist investor has dismissed Iger’s recent initiatives to bolster Disney’s stock as “throwing spaghetti at the wall” to see what sticks. 

The 81-year-old billionaire called on Disney to cut costs and achieve “Netflix-like” profit margins in its streaming business, while criticising its “woke” movie strategy, telling the Financial Times recently: “Why do I have to have a Marvel that’s all women? . . . Why do I need an all-Black cast?”

The vote of confidence will bolster Iger, who is widely considered to be the most powerful executive in Hollywood, as he tries to steer Disney through a wrenching transformation. 

While the outcome of the vote is a blow to Peltz, Disney’s share price has gained more than 50 per cent over the past six months, even as it remains well below the highs reached three years ago.

The contest split influential proxy advisers, with Glass Lewis recommending that shareholders back Disney, while ISS recommended adding Peltz to the board. 

As well as Vanguard and BlackRock, Iger won the backing of large investors including T Rowe Price and Norges Bank Investment Management.

Peltz’s supporters included Calpers, the California public employees pension fund, which said Disney would benefit from “fresh eyes”, and Neuberger Berman. 

About a third of Disney’s shareholder base is composed of individuals — many of whom are enthusiasts of its theme parks and characters. 

The proxy battle has played out like a political campaign, with each side pouring tens of millions of dollars into pamphlets, phone calls and videos imploring shareholders to “vote white” for Disney, or “vote blue” for Trian.

Disney has spent $40mn on the proxy battle while Trian has invested $25mn and Blackwells has put $6mn into its push. 

Iger, who at one point considered a run for the White House, enlisted business leaders and personal friends to vouch for him. The likes of JPMorgan chief Jamie Dimon, Star Wars creator George Lucas, Laurene Powell Jobs, and the grandchildren of Walt Disney all threw their support behind Iger. 

In fending off the activists, Iger has unveiled a host of initiatives to please investors: raising Disney’s target for free cash flow, announcing a $1.5bn investment into Epic Games, promising steep cost cuts and declaring a 50 per cent dividend increase as well as a $3bn share buyback.

Among Peltz’s biggest complaints was Iger’s botched succession process, reviving an issue that has dogged Disney for decades as its chief executives have been reluctant to retire. Iger extended his contract repeatedly during his tenure as CEO from 2005 to 2020, and his successor, Bob Chapek, was fired after less than three years.

“Leadership changes have been the Achilles heel of Disney,” said Needham analyst Laura Martin. “Succession will be the most important test of the new board, no matter who they are.”

Disney declined to comment. Trian did not respond to requests for comment.

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