Walt Disney’s Bob Iger is locking up powerful supporters ahead of Wednesday’s annual meeting clash with activist investors challenging his strategy for the entertainment giant.
In his six-month battle with activists including billionaire Nelson Peltz, who is seeking a seat on Disney’s board, Iger has used his status as one of the world’s most visible and well-connected chief executives to bolster his defences.
He has secured public endorsements from JPMorgan chief executive Jamie Dimon, members of the Disney family, and prominent shareholders including Laurene Powell Jobs and Star Wars creator George Lucas.
He has also announced a host of initiatives aimed at pleasing investors: raising Disney’s target for free cash flow, announcing a $1.5bn investment in Epic Games, promising steep cost cuts and declaring a 50 per cent dividend increase and a $3bn share buyback.
Yet the vote has remained closely fought, even in its final stages.
In the weeks before the AGM, Trian Partners’ Peltz — one of the two activists waging proxy battles against Disney — secured endorsements from a pair of shareholder advisers.
One of them, the influential Institutional Shareholder Services, said adding Peltz as a Disney director would provide “assurance to other investors that the board is properly engaged”. Calpers, the California pension fund, also told Reuters it had voted for Trian’s nominees because it thought Disney would benefit from “fresh eyes” on its board.
But Iger has added large investors to his list of supporters. Norges Bank Investment Management, which runs the world’s biggest sovereign wealth fund and is a top-10 shareholder in Disney, is backing the board. The fund is withholding support for Peltz and Jay Rasulo, a former chief financial officer at Disney for whom Peltz is also seeking a board seat, according to a disclosure on its website.
T Rowe Price, a top-20 shareholder, on Monday said it was also backing Iger’s camp. It said: “We are comfortable that management has a viable plan to address the important matters facing the company.”
Disney shares are up about a third this year, giving a sense of momentum to a stock that had been declining since it reached a peak of $197.16 at the top of the streaming bubble in March 2021.
“Sentiment on Disney has clearly improved — you can see it in the stock price,” said Michael Morris, an analyst at Guggenheim Securities. “I don’t think that the company has crossed the finish line by any means, but there is more embedded optimism that they will be able to achieve their objectives.”
Peltz claims credit for Disney’s share price gains, saying the fresh campaign he launched in October has helped fuel the rally. The 81-year-old has dismissed Iger’s recent initiatives as “throwing spaghetti at the wall” to see what sticks.
Peltz is a veteran of successful proxy battles at Procter & Gamble and Heinz, as well as an aborted one for Disney last year. Under Iger’s leadership, he argues, the media and theme park group waited too long to develop a streaming strategy, overpaid on its $71bn acquisition of Fox, which closed in 2019, and let creativity at its movie studios stagnate.
“Disney has lost its way,” Trian wrote in a letter to the company’s shareholders. Peltz says the group needs to achieve “Netflix-like” profit margins in its streaming business, which has lost billions of dollars since its launch.
Improving streaming profitability is just one of the challenges that will still face Iger and his board even if they win the vote.
In addition to ISS, proxy adviser Egan-Jones backed Trian, citing “the apparent lack of a . . . long-term succession plan” to replace Iger as one of its reasons for siding with the activist. Glass Lewis, another advisory firm, endorsed Iger and the current board.
Blackwells Capital, the second activist, has put up its own slate of three directors for the board. “Disney’s content and technology strategies are weak and its lack of transparency is stark,” the firm said in its letter to the entertainment company’s shareholders.
While the proxy battles raged, Iger tried to reassure investors that the company had shifted from “fixing” to “building” mode. On Wall Street, analysts give him credit for positioning the streaming business to turn a profit by September — and for making good hires, including Hugh Johnston as chief financial officer. Before Disney, Johnston helped fend off a challenge from Peltz at PepsiCo.
Michael Nathanson, an analyst at MoffettNathanson, said “the company is focused on all the right things”, since Iger returned. The theme parks are performing strongly and he credited Iger with reducing Disney’s exposure to India by merging its local film and TV business with Mukesh Ambani’s Reliance Industries in February.
Less clear is how the company will handle the further decline of its cable networks as more consumers move towards streaming. A major shift will occur next year when the ESPN sports network, a longtime profit machine, will become available as a streaming service. Disney is also forming a new sports streaming service with Fox and Warner Bros Discovery.
Another crucial task is to improve performance at Disney’s studios, including Marvel and Pixar. Iger has made restoring Disney’s creative spark a priority, but Morris at Guggenheim Securities said that after a number of box office “misses”, the group needs to improve studio performance soon. “There’s not much room at this point for a prolonged recovery,” he said.
For the activists, perhaps the biggest question is over the board and Iger’s successor. The CEO extended his contract repeatedly during his tenure from 2005-20, and his successor, Bob Chapek, was fired after less than three years.
Disney says the board is planning for Iger’s succession when his contract is up in 2026. It recently appointed former Morgan Stanley chief James Gorman, who was praised for how he handled his own succession, to the board. But the issue continues to hang over the company.
“Wall Street still generally has a high degree of confidence in Bob Iger,” Morris said. “But the issue of his successor has been a hot topic for many years and it’s still seemingly at square zero.”
Additional reporting by Patrick Temple-West and Anna Nicolaou
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