Disney edges ahead in battle for board seats with activist investors

Walt Disney appeared to pull ahead of activist investors in the battle for board seats and the future of the global entertainment conglomerate, with more than half of all shares voted before the company’s annual meeting on Wednesday.

T. Rowe, which owns roughly 11.7 million shares in Disney, representing about a 0.64% stake, backed the company and said it had voted to re-elect Maria Elena Lagomasino and Michael Froman, the two Disney directors being challenged by Nelson Peltz’s Trian Fund Management.

The company scored another victory on Monday as it appeared to secure the support of another powerful investor, Disney’s second-largest shareholder BlackRock according to sources familiar with the matter. BlackRock declined to comment.

While the backing of the big institutional investors could give Disney an early edge in the proxy battle, people involved in reviewing the shareholders’ votes cautioned that results could yet change as more votes will come in on Tuesday. Even those who already voted have a chance to change their decision.

Top executives at Disney, activist investors Trian and Blackwells Capital, and armies of call center workers hit the phones to woo voters in last-minute pleas to elect their board candidates.

Disney wants shareholders to elect all 12 of its current directors while the two hedge funds, Trian and Blackwells, are pushing for their own seats.

The board room battle comes at a pivotal time for Disney, as the company tries to reinvigorate its creative franchises, make its streaming business profitable and find partners to help build ESPN’s digital future. Chief Executive Bob Iger has called the activist campaigns a “distraction.”

Disney’s stock price has climbed 34% in 2024, but it remains down nearly 40% from its record high close in March 2021.

Billionaire investor Peltz’s Trian aims to snatch two seats, one for himself and one for former Disney chief financial officer Jay Rasulo.

On Monday morning Trian said again in materials sent to investors that current Disney directors Lagomasino and Froman – “one an advisor to wealthy families and the other with experience in foreign affairs” – lack relevant skills.

Blackwells Capital portfolio manager, Jason Aintabi, who is pushing for three board seats, is pressing investors to vote for anyone but Peltz, people familiar with his calls said. He is also urging the company to come up with a plan for artificial intelligence and consider splitting off its theme park and hotel assets into a real estate investment trust.

Iger, who was recruited out of retirement in 2022 to run the company a second time, is dialing shareholders to say his transformation is underway and there is no need for the distraction of activist investors in the board room, people familiar with the calls said. Other Disney board members are also reaching out to investors, the people said.

Disney did not reply to requests for comment.

“Each side has hundreds of people making phone calls to investors who have either already voted and we want to change their vote or they haven’t voted at all and we want to bring them on board,” a person with first-hand knowledge of the voting said on Monday.

Succession planning
On Monday morning, Disney board member Carolyn Everson, who joined in 2022 when billionaire investor Daniel Loeb’s hedge fund Third Point was pushing for changes, addressed the criticism that Disney’s board has failed in succession planning. The board brought Iger back following the tumultuous tenure of his hand-picked successor, Bob Chapek.

Everson said the board is making progress and examining internal candidates, whom Iger is mentoring, and considering external candidates, as well.

“It’s the No. 1 job of the board, and we take it very seriously,” Everson said in an interview on CNBC.

The company’s annual meeting, which will be held virtually, is scheduled for 1 pm Eastern time on Wednesday.

There is still an opportunity to sway shareholders as each side raced to dial up portfolio managers at mutual funds and the stewardship teams that vote the shares owned by the large index funds – Vanguard, BlackRock and State Street.

The Wall Street Journal first reported that BlackRock appears to have voted for Disney. Vanguard and State Street could not be reached for comment on Monday.

While Disney has an unusually large number of non-institutional “mom and pop” shareholders, which control 35% to 40% of the company, the vote ultimately will turn on how the index funds vote.
Vanguard owns 8.2% of Disney’s outstanding shares with BlackRock and State Street each owning roughly 4%.

No side is ready to take a victory lap yet, though. Each side has scored some wins recently after Peltz gained the recommendation of proxy advisory firm Institutional Shareholder Services that shareholders should elect him.

The entertainment giant is counting, in part, on shareholders being swayed by the endorsements of what one source called “the parade of all-stars,” including “Star Wars” creator George Lucas, Emerson Collective founder Laurene Powell Jobs and JPMorgan Chase Chairman Jamie Dimon, all of whom threw their support behind Iger and the current board.