• by Adam Buckman , Featured Columnist, February 16, 2024

The battle for Disney's board has expanded into a new theater of operations -- our mailbox!

Competing direct-mail packages arrived at our home on the same day earlier this week -- one from Disney and the other from the activist investment firm, Trian Partners, which seeks to win seats on the board to force changes in the company's strategy.

“VOTE NOW,” says a placard (pictured above) positioned on top of the other materials in the Disney package. “Your Vote Is Very Important To Us,” says a subhead.

“RESTORE THE MAGIC,” says a placard in the Trian package that is similarly positioned atop the mailing's other contents.

The opposing poly-wrapped packages are being sent out to shareholders large and small (such as us) as part of an elaborate proxy vote-getting campaign being mounted by both factions in advance of Disney's annual shareholders' meeting April 3.

Trian wants to capture two seats on Disney's board. The Trian candidates are financier Nelson Peltz, 81, who has bought up $3 billion-worth of Disney stock, and James “Jay” A. Rasulo, 68, one-time Disney executive who held a variety of top jobs at the Mouse House. He owns $600,000 in Disney stock.

Peltz has been complaining about Disney's financial position and corporate strategies for some time. A victory for Peltz and Rasulo would pose a threat to the leadership of Disney CEO Bob Iger.

The proxy vote is seen essentially as a choice between Iger and the activist investors. Or to put it another way, it's a battle between white and blue -- the colors of the mail-in ballots of Disney and Trian, respectively.

“Vote the BLUE proxy card,” says a sheet of “voting instructions” from Trian.

“Your [Disney] Board strongly urges you to discard and NOT to vote using any blue proxy card or any green proxy card sent to you by the Trian Group and the Blackwells Group, respectively,” said a letter to shareholders from Disney Board Chairman Mark G. Parker included in the direct-mail package.

The green proxy vote refers to a smaller investment firm, Blackwells Capital, that also seeks seats on the Disney board. Unfortunately, we have not heard from them yet.

Trian's vote-for-us material takes specific aim at Disney's TV sectors. “Disney+, the emerging streaming business, has been poorly managed,” Trian said.

“Since the service was launched in 2019, Disney+ has failed to achieve profitability in any fiscal year. … In total, the streaming businesses have cost the Company more than $14 billion in operating losses over the last six years.” Trian said.

ESPN comes next. “ESPN is challenged and lacks a clear strategy. … The once-lucrative business has suffered as cord-cutting has accelerated and sports rights have dramatically increased. ESPN has continued to shed subscribers,” Trian's material said.

By contrast, Disney's document tries hard to put the best face on the fates and fortunes of its streaming efforts and ESPN.

“We are rationalizing the volume of content we make and what we spend; perfecting our pricing and marketing strategies; maximizing our enormous advertising potential; and moving toward a more unified one-app experience by making extensive Hulu content available to bundle subscribers via Disney+,” Disney said in a shareholders’ letter signed by Iger.

On the subject of ESPN, “there is tremendous value in sports, demonstrated by the immense popularity of ESPN's programming and its growth in both revenue and operating income for the past two fiscal years amidst a backdrop of notable linear industry declines,” Disney claimed.

“We are preparing ESPN for a future in streaming that will further harness the power of live sports and entertainment in innovative new ways,” continued this p.r. boilerplate that essentially gave no inkling of what Disney means to do with ESPN or Disney+.

The dueling documents get personal as Disney states flat out that Trian's board candidates have nothing to offer but “stale perspectives.”

“Mr. Peltz brings no media experience and has presented no strategic ideas for Disney, while Mr. Rasulo's perspective is stale given he left Disney in 2015 and has not held any executive positions in the industry since,” Disney said.

Trian's materials accuse Iger and Disney's non-management directors of maintaining “almost no skin in the game” when it comes to their personal investments in Disney stock.

“Disney's 11 non-management directors appear to have so little faith in Disney's future that they have purchased a total of less than $350,000 of Disney stock during their tenures,” Trian said. “Nine of them have never bought a single share! Relative to their wealth, they have almost no skin in the game.”

“Meanwhile, Iger has sold nearly all of his Disney stock, reaping proceeds in cash of more than $1 billion; today, he is left owning comparatively few shares,” the Trian document complains.

The Wall Street Journal reported earlier this week that this multimedia proxy fight -- of which direct mail is just one part -- could emerge as the most expensive in the history of such battles with an estimated total cost of $70 million between Disney, Trian and Blackwells.