Nelson Peltz, founding partner of Trian Fund Management LP, speaks at the WSJD Live conference in Laguna Beach, Calif., on Oct. 25, 2016.Mike Blake/Reuters
Activist investor Nelson Peltz on Thursday ended his quest for a board seat at Walt Disney Co DIS-N after Chief Executive Bob Iger laid out plans to fix the home of Mickey Mouse, cheering investors.
“The proxy fight is over. This is a win for all shareholders,” a spokesperson for Peltz’s Trian Fund Management said.
The decision came only hours after Disney reported earnings that topped Wall Street expectations and Iger outlined a corporate restructuring that included 7,000 job cuts and addressed many of Peltz’s criticisms.
After weeks of trading increasingly personal barbs, Peltz extended an olive branch to Disney saying he congratulated the company and its CEO on new “operating initiatives” that dovetail with his thinking.
Disney issued a statement applauding Peltz’s decision to end the board challenge. “We have tremendous faith in Bob Iger’s leadership and the transformative vision for Disney’s future he set forth yesterday,” the board said.
Trian owns a stake of nearly $1-billion in Disney and had criticized the company for bungled succession planning, overpaying for new assets and runaway costs.
Disney provided more details on Thursday about its restructuring, which returns control over business units to the company’s creative executives.
Disney shares were up 1.5 per cent at $113.44 on Thursday afternoon. The stock has risen nearly 30 per cent since the start of the year.
For Peltz’s Trian Fund Management the board challenge appears to have paid off with an estimated 20 per cent gain on his investment. Based on public filings, Peltz paid an average $94.09 per share for his initial investment.
As recently as last week Peltz was trying to rally shareholders to vote him onto Disney’s board, arguing that he had the experience, after sitting on 11 boards, to help turn the company around. Disney disagreed and said he lacked necessary skills.
The proxy contest was shaping up as one of the year’s most contentious, pitting a billionaire investor against a chief executive who was widely admired in Hollywood.
Iger, who came out of retirement in November to return to Disney, on Wednesday dazzled Wall Street on his first earnings call since replacing Bob Chapek, who was fired last year after the company in November reported a 66 per cent drop in quarterly profit.
The CEO addressed issues Peltz had raised in his proxy battle and said Disney was reorganizing into three divisions: an entertainment unit encompassing film, television and streaming, a sports-focused ESPN unit and one with parks, experiences and products.
“Our new structure is aimed at returning greater authority to our creative leaders and making them accountable for how their content performs financially,” Iger told investors on Wednesday. “Our former structure severed that link, and it must be restored.”
Disney Entertainment co-Chairmen Alan Bergman and Dana Walden will be responsible for global entertainment content, including streaming. Bergman will oversee film, animation, live action, the theatrical group and music, and Walden will be responsible for television and Hulu originals.
Jimmy Pitaro will lead ESPN, a sports group that includes the ESPN networks and ESPN+ streaming service. Josh D’Amaro will retain oversight of parks, experiences and products.
As part of the restructuring, Rebecca Campbell, head of International Content and Operations, is leaving the company after 25 years. Iger commended her in a memo on Thursday.
Bergman, Walden and Pitaro sent a separate memo to staff, acknowledging the reorganization would result in reductions to our overall workforce, “which will affect every segment and function across the company.”
Analysts said Peltz made a reasonable request for one board seat and to join the 12-member board himself. But Wednesday’s earnings and restructuring announcement handicapped his chances of winning a protracted battle.
People familiar with Peltz’s thinking said he now felt it unnecessary to expend time and money on that fight. Peltz appeared on CNBC on Thursday to announce his proxy battle with Disney was over.
His reversal gives Iger and management some breathing room. “Iger has a lot on his plate,” said LightShed Partners media analyst Rich Greenfield. “And an activist just takes time away from figuring out Disney’s future.”
Wall Street’s early reaction to Disney’s moves was positive.
“While we are encouraged by Bob Iger’s strategic vision for Disney, this is clearly the first phase in Disney’s transformation, which will require adept execution,” wrote Bank of America media analyst Jessica Reif Ehrlich in an investor note. “Bob Iger has a long, strong track record which provides confidence he will manage this transition for Disney.”