The Walt Disney Co. said it made a deal with ValueAct Capital Management as it fights off a proxy fight led by activist investor Trian Fund Management and former Disney executive Isaac Perlmutter.
ValueAct, a San Francisco-based investment fund, had been reportedly building a stake in Disney of undisclosed size. Trian and Perlmutter, the former chair of Marvel Entertainment, own 44 million Disney shares.
ValueAct has agreed to support Disney CEO Bob Iger and the Disney board’s recommended slate of directors at the company’s 2024 meeting.
Disney also signed a confidentiality agreement with ValueAct, enabling ValueAct to receive information about Disney, have meeting with directors and executives and consult on strategic matters.
ValueAct previously invested in Spotify, The New York Times, 21st Century Fox, Nintendo, Microsoft, Adobe and Salesforce.
Disney’s stock price has plunged as cord cutting has eaten into the linear TV businesses and the cost of competing in streaming has created barrels of red ink.
Under pressure from shareholders, Disney has cut $7.5 million in costs and reduced headcount by about 5,000.
Trian, seeking two seats on Disney’s board, complained the company’s shares have lost $70 billion in value since February, further cost-cutting is needed and the board needs executives with more media experience.
Disney has alleged that Perlmutter, whose employment at Marvel Entertainment was terminated by Disney earlier this year, has a “longstanding personal agenda” against Iger.
Another hedge fund, Blackwells Capital, plans to nominate three directors for Disney’s board.
“ValueAct Capital has a track record of collaboration and cooperation with the companies it invests in, and its co-CEO, Mason Morfit, has been very constructive in the conversations we’ve had over the past year,“ Iger said. “We welcome their input as long-term shareholders.”
Last year, Iger indicated that Disney’s linear businesses, including ABC, its entertainment cable networks and its TV stations, might not be core assets, setting up the possibility of a sale. Iger later walked that back, indicating that those assets might still have value to the company.
Disney is also in the process of creating a standalone, direct-to-consumer version of ESPN and combining Disney Plus and Hulu into a streaming business that can compete with Netflix.
“Disney is the world’s leading entertainment company. It has the best intellectual property, sports brand and parks & experiences assets in the industry,” said Morfit, who is chief investment officer for ValueAct as well as co-CEO. “As legacy technologies transition to digital platforms, we believe Disney can lead the media industry forward. We could not be more excited to partner with Bob and the board to help create long-term sustainable shareholder value.”
Blackwells said its board nominees are: Jessica Schell, a former Warner Bros. Discovery and NBCUniversal executive; Craig Hatkoff, a real estate investor and co-founder of the Tribeca Film Festival, and Leah Solivan, a venture capitalist and technology investor who founded TaskRabbit and sold it to Ikea.
“Blackwells’s highly qualified candidates have the necessary backgrounds and expertise to support Mr. Iger’s efforts constructively and complement the board,” Blackwells said. “The Trian nominees, and the reductive nature of its campaign do not provide shareholders those benefits.”
Blackwells also criticized Trian for flip-flopping, self-interest and personal quarrels that have no place in a boardroom.
“We call on Mr. Peltz to end his peacocking so that Disney can focus on its bright future, and not be dragged backward in time," Blackwells chief investment officer Jason Aintabi said.
"Disney’s current leadership is invaluable to its shareholders, and our three exceptional candidates are being nominated along with a business proposal specifying that any incumbent director outvoted by Blackwells’ nominees be immediately added back to the Board following the 2024 Annual Meeting,” Aintabi said. "This campaign provides shareholders a necessary alternative to what would otherwise be a solipsistic sideshow.”
Disney said its board governance and nominating committees will review the proposed Blackwells nominees and provide a recommendation to the board as part of its governance process.
“Disney has an experienced, diverse, and highly qualified Board that is focused on the long-term performance of the company, strategic growth initiatives including the ongoing transformation of its businesses, the succession planning process and increasing shareholder value,” the company said in a statement.
