A fight brews between Disney and activist Peltz. This is how the situation can develop

A masked family walks past Cinderella Castle in the Magic Kingdom at Walt Disney World in Lake Buena Vista, Florida.

Orlando Sentinel | Tribune News Service | Getty Images

Activist investor Nelson Peltz is planning a proxy battle for a seat on Disney’s board.

Disney offered Peltz, founding partner of Trian Fund Management, a role as board observer and asked him to sign a standstill agreement, which Peltz refused. Here are our thoughts on the situation.

Offer of a board observer position

Sometimes a board observer position can be advantageous, particularly for investors who do not have much board experience and are less likely to contribute regularly to board discussions. But offering Peltz a position as board observer is like saying to Whitney Houston, “You can join the band, but you can’t sing.” There’s no way Disney thought for a second that Peltz would accept that offer, and there’s no way he should have accepted it.

Why is this happening?

Trian’s claims

Trian expelled a presentation to make his case. In proxy struggle presentations, each side uses the facts and data to paint a picture that benefits them, and often these claims do not stand up to scrutiny. For example, Trian questions Disney’s total shareholder return under Iger: 270% versus 330% for the S&P500 about the same time. I’m not sure how that compares to the industry, but I suspect they would have taken advantage of this if industry returns were more favorable to Trian. As British economist Ronald Coase said, “If you torture the data long enough, they confess everything.” In this case, we can say that Bob Iger was a bad CEO for Disney. Trian also has objections to Iger’s decision to take on Fox, and he should – in hindsight it was a terrible decision. But he should also include in this analysis Iger’s decisions to acquire Pixar, Marvel, and Lucasfilm, which have grossed Disney more than $33.8 billion at the global box office, and billions more in merch and theme park expansions.

Nelson Peltz as director

All of that criticism of proxy battle tactics and strategies aside, and regardless of how we torment the data from Peltz’s record as a director, of course he should be on Disney’s board of directors. He is a major shareholder with a strong track record of creating value through operational, strategic and capital allocation decisions. No, Peltz won’t be the most valuable director when it comes to deciding who to star in the next Disney blockbuster or what rides to build at the amusement parks — the board is relying on management for those insights. But he will be the most prepared and valuable board member when it comes to providing financial analysis on the various strategic and capital allocation options available to Disney and advising the board on what decisions are best for shareholders. Peltz has also proven to be a valuable director in helping management teams reduce operating expenses and improve margins, which Disney could use. And if his past is any indication, he’ll likely be good friends with Bob Iger by the end of his tenure.

chance of winning

https://www.cnbc.com/2023/01/14/a-battle-between-disney-and-activist-peltz-brews-heres-how-the-situation-may-unfold.html A fight brews between Disney and activist Peltz. This is how the situation can develop

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