The Trian Group,1 which beneficially owns over $3.5 billion of
common stock in The Walt Disney Company (NYSE: DIS), today
announced that Institutional Shareholder Services Inc. (“ISS”), the
largest and most influential proxy advisory firm, recommends that
Disney shareholders vote
“FOR” Nelson Peltz and
“WITHHOLD” on Maria Elena Lagomasino on Trian’s
BLUE proxy card in connection with Disney’s annual meeting on April
3, 2024.
ISS recognizes that Disney has a record of “multi-year
underperformance” and emphasizes the need for change on the Disney
Board. ISS also states that Nelson Peltz, with his “considerable
experience on other boards and fiduciary duties owed to a large
shareholding group, appears best positioned to bring a shareholder
perspective to the Board.”
ISS notes that Mr. Rasulo’s “knowledge of [Disney’s] operations…
still appears to serve as a solid basis for understanding the
company's current situation.”
In addition to Disney’s significant operational deterioration
and stock underperformance, ISS noted Disney has failed to
adequately address succession and that the Board would benefit from
a shareholder representative to hold management to account and to
“provide the catalyst that this board apparently needs to improve
its effectiveness.”
ISS also recommends that shareholders
“WITHHOLD” on Maria Elena Lagomasino, stating that
she “bears more accountability than most for the failed succession
process prior to Iger's decision to step down in 2020,” and stating
that “multi-year concerns surrounding Lagomasino's role as a
compensation committee member strengthen the case that Peltz's
addition, on balance, would appear a net positive.”
In making its recommendation, ISS also noted the following:
Performance
- “[Disney] has significantly underperformed the S&P 500 over
the one-, three-, and five-year periods through Oct. 6, 2023, the
last trading day before The Wall Street Journal reported that Trian
was preparing to run a proxy fight at the 2024 AGM.”
- “Operational performance over the past five years shows
deterioration in margins, free cash flow, and return metrics, as
well as increased leverage.”
- Issues as identified by ISS include “that financially the Fox
acquisition was value destructive, that the secular decline in
linear networks is an ongoing challenge that needs to be addressed,
that the costs within DTC got out of control, that the studio
business has underperformed relative to the decade prior to the
pandemic, that Parks and Experiences has been a bright spot in
earnings and requires ongoing investments to maintain its strength,
and the challenge of transitioning ESPN to DTC to address secular
decline in linear networks.”
Case for Change
- “[I]ncremental change is needed at the company due to
multi-year underperformance of the company's peers and chosen
benchmark, operational challenges, and most critically, a repeated
failure on the part of the board to oversee the cultivation of a
successor to Iger.”
- “The importance of executing a successful succession plan,
particularly for a company of this complexity, and the board's
prior failure to properly oversee this process, suggests that some
level of change at the board level is warranted.”
Board Oversight Failures
- “[T]he key decision points that led to the company's challenges
over the past five years, not to mention multiple activist
campaigns, can be traced to the board.”
- “Chapek seems to have taken enough wrong turns during his
tenure (at least by the board's own assessment) that a more engaged
board should arguably have recognized these issues sooner.”
- “[T]he events leading up to the CEO transition in 2020 and the
strategic missteps taken over the past several years appear to
indicate that the board is not functioning in the most optimal
way.”
- “[T]he sudden firing of Chapek less than five months after
extending his contract and the circumstances surrounding the
announcement of Chapek's departure and Iger's return appear to
indicate that the board was caught by surprise about the state of
affairs at the company.”
Succession Planning Failures
- “What remains missing is tangible progress towards succession
to give investors sufficient confidence that the company will not
run aground after Iger departs, and in doing so, avoid future
mutinies.”
- “By definition, the decision to ask a former CEO (especially
one who indicated it was time for him to retire) to return to the
company to replace a successor whom the board did not adequately
vet is evidence of a critically flawed succession process. In
[Disney’s] case, shareholders paid a steep price.”
- “[T]he board fell short on two key matters: cultivating a
successor to Iger, and preventing Chapek from veering off course
after he was appointed.”
- “[T]here are lingering questions about the board's ability to
properly oversee the next CEO transition, whether it happens in
2026 or in later years, and the significant strategic changes the
company is undertaking, particularly given the ongoing challenging
industry environment.”
- “The heir apparent to a CEO role at an iconic consumer-facing
American company necessarily faces intense investor, board, and
media scrutiny. That the board has not seen fit to put anyone in
this position since the departure of Staggs in the first half of
2016 represents as close to a single-issue indictment of a board's
performance that one could imagine.”
Trian and its Nominees
- “Trian represents significant share ownership and has presented
a detailed case for change and a clear set of goals for the board
to consider.”
- “[A] shareholder representative who is well versed in the
imperative to hold management to account would be well positioned
to provide the catalyst that this board apparently needs to improve
its effectiveness.”
- “[Nelson] Peltz, as a significant shareholder, could be
additive to the succession process, providing assurance to other
investors that the board is properly engaged this time around. He
could also help evaluate future capital allocation decisions.”
- “[Mr. Rasulo] came across as levelheaded and demonstrated no
sign of resentment or ill will towards Iger.”
- “[We do] not have any concerns about [Mr. Rasulo’s] ability to
serve as an objective director.”
Maria Elena Lagomasino and Michael B.G.
Froman
- “Neither director targeted by Trian possesses a skill set that
is not possessed by a board member, or that could be provided by a
specialized consultant were a short-term need to arise.”
- “As the longest-serving independent member of the board, [Maria
Elena] Lagomasino bears more responsibility than any other serving
nominee for the failure of the Staggs/Rasulo ‘bakeoff,’ the failure
to cultivate a readily apparent successor to Iger following Staggs'
departure, and again following Iger's re-entry.”
- “During her time on the board, [Maria Elena] Lagomasino has
chosen to support four extensions of Iger's tenure as CEO, yet
along with her shorter-tenured independent fellow directors, has
not yet named a CEO successor.”
- “As a member of the compensation committee since joining the
company [in 2015] (and as chair of the committee since 2019),
[Maria Elena] Lagomasino oversaw consecutive years of problematic
compensation decisions, resulting in significant shareholder
opposition, which the committee failed to promptly address.”
To ensure the election of Nelson Peltz and Jay Rasulo, it is
essential that shareholders vote “FOR”
Nelson Peltz and Jay Rasulo, and
“WITHHOLD” on Michael B.G. Froman, Maria
Elena Lagomasino, and all three Blackwells Nominees. As
Disney’s annual meeting is less than two weeks away, it is
important that shareholders vote TODAY. Every vote is important.
Shareholders must submit their vote no later than April 2, 2024, at
11:59pm ET.
For more information, including voting instructions, visit our
website: www.RestoreTheMagic.com.
About Trian Fund Management, L.P.
Founded in 2005, Trian Fund Management, L.P. (“Trian”) is a
multi-billion dollar investment management firm. Trian is a highly
engaged shareowner that combines concentrated public equity
ownership with operational expertise. Leveraging the 40+ years’
operating experience of our Founding Partners, Nelson Peltz and
Peter May, Trian seeks to invest in high quality but undervalued
and underperforming public companies and to work collaboratively
with management teams and boards to help companies execute
operational and strategic initiatives designed to drive long-term
sustainable earnings growth for the benefit of all
stakeholders.
Media Contacts:
Anne A. Tarbell(212) 451-3030atarbell@trianpartners.com
Paul Caminiti / Pamela Greene / Jacqueline ZuhseReevemark(212)
433-4600Trian@reevemark.com
Investor Contacts:
Matthew Peltz(212) 451-3060mpeltz@trianpartners.com
Ryan Bunch(212) 451-3176rbunch@trianpartners.com
Bruce Goldfarb / Pat McHughOkapi Partners LLC(212) 297-0720(877)
629-6357info@okapipartners.com
Edward McCarthy / Richard Grubaugh / Thomas GerminarioD.F. King
& Co., Inc. (212) 229-2634 Disney@dfking.com
Disclaimer
Except as otherwise set forth in this press
release, the views expressed in this press release reflect the
opinions of Trian Fund Management, L.P. and its affiliates
(“Trian”), and are based on publicly available information with
respect to The Walt Disney Company (“Disney” or the “Company”).
Trian recognizes that there may be confidential information in the
possession of the Company that could lead it or others to disagree
with Trian’s conclusions. Trian reserves the right to change any of
its opinions expressed herein at any time as it deems appropriate
and disclaims any obligation to notify the market or any other
party of any such change, except as required by law. Trian
disclaims any obligation to update the information or opinions
contained in this press release, except as required by law. For the
avoidance of doubt, this press release is not affiliated with or
endorsed by Disney.
This press release is provided merely as
information and is not intended to be, nor should it be construed
as, an offer to sell or a solicitation of an offer to buy any
security nor as a recommendation to purchase or sell any security.
Funds, investment vehicles, and accounts managed by Trian currently
beneficially own shares of the Company. These funds, investment
vehicles, and accounts are in the business of trading – buying and
selling – securities and intend to continue trading in the
securities of the Company. You should assume such funds may from
time to time sell all or a portion of their holdings of the Company
in open market transactions or otherwise, buy additional shares (in
open market or privately negotiated transactions or otherwise), or
trade in options, puts, calls, swaps or other derivative
instruments relating to such shares.
Some of the materials in this press release
contain forward-looking statements. All statements contained herein
that are not clearly historical in nature or that necessarily
depend on future events are forward-looking, and the words
“anticipate,” “believe,” “expect,” “potential,” “could,”
“opportunity,” “estimate,” “plan,” “once again,” “achieve,” and
similar expressions are generally intended to identify
forward-looking statements. The projected results and statements
contained herein that are not historical facts are based on current
expectations, speak only as of the date of these materials and
involve risks, uncertainties and other factors that may cause
actual results, performances or achievements to be materially
different from any future results, performances or achievements
expressed or implied by such projected results and statements.
Assumptions relating to the foregoing involve judgments with
respect to, among other things, future economic competitive and
market conditions and future business decisions, all of which are
difficult or impossible to predict accurately and many of which are
beyond the control of Trian.
The estimates, projections and potential impact
of the opportunities identified by Trian herein are based on
assumptions that Trian believes to be reasonable as of the date of
this press release, but there can be no assurance or guarantee (i)
that any of the proposed actions set forth in this press release
will be completed, (ii) that the actual results or performance of
the Company will not differ, and such differences may be material,
or (iii) that any of the assumptions provided in this press release
are accurate.
Trian has neither sought nor obtained the
consent from any third party to use any statements or information
contained herein that have been obtained or derived from statements
made or published by such third parties, nor has it paid for any
such statements. Any such statements or information should not be
viewed as indicating the support of such third parties for the
views expressed herein. Trian does not endorse third-party
estimates or research which are used herein solely for illustrative
purposes.
Important Information
Trian Fund Management, L.P., together with
Nelson Peltz, Peter W. May, Josh Frank, Matthew Peltz, Isaac
Perlmutter, James A. Rasulo, Trian Fund Management GP, LLC, Trian
Partners, L.P., Trian Partners Parallel Fund I, L.P., Trian
Partners Master Fund, L.P., Trian Partners Co-Investment
Opportunities Fund, Ltd., Trian Partners Fund (Sub)-G, L.P., Trian
Partners Strategic Investment Fund-N, L.P., Trian Partners
Strategic Fund-G II, L.P., Trian Partners Strategic Fund-K, L.P.,
The Laura & Isaac Perlmutter Foundation Inc., Object Trading
Corp., Isaac Perlmutter T.A., and Zib Inc. (collectively, the
“Participants”) filed a definitive proxy statement and accompanying
form of blue proxy card (as supplemented and amended on February
12, 2024, the “Definitive Proxy Statement”) with the Securities and
Exchange Commission (the “SEC”) on February 1, 2024 to be used in
connection with the 2024 annual meeting of shareholders of the
Company.
THE PARTICIPANTS STRONGLY ADVISE ALL
SHAREHOLDERS OF THE COMPANY TO READ THE DEFINITIVE PROXY STATEMENT
AND OTHER PROXY MATERIALS BECAUSE THEY CONTAIN IMPORTANT
INFORMATION. SUCH PROXY MATERIALS ARE AVAILABLE AT NO CHARGE ON THE
SEC’S WEBSITE AT HTTP://WWW.SEC.GOV AND TRIAN’S WEBSITE,
HTTPS://RESTORETHEMAGIC.COM. THE DEFINITIVE PROXY STATEMENT AND
ACCOMPANYING PROXY CARD WILL BE FURNISHED TO SOME OR ALL OF THE
COMPANY’S SHAREHOLDERS. SHAREHOLDERS MAY ALSO DIRECT A REQUEST TO
EITHER OF TRIAN’S PROXY SOLICITORS, OKAPI PARTNERS LLC, 1212 AVENUE
OF THE AMERICAS, NEW YORK, NY 10036 (SHAREHOLDERS CAN E-MAIL
INFO@OKAPIPARTNERS.COM OR CALL TOLL-FREE: (877) 629-6357), OR D.F.
KING & CO., INC., 48 WALL STREET, NEW YORK, NY 10005
(SHAREHOLDERS CAN E-MAIL DISNEY@DFKING.COM OR CALL TOLL-FREE: (800)
207-3158).
Information about the Participants and a
description of their direct or indirect interests by security
holdings or otherwise can be found in the Definitive Proxy
Statement.
1 Please refer to the definitive proxy statement, filed with the
United States Securities and Exchange Commission by Trian
Fund Management L.P. and certain of its affiliates and other
persons (the “Definitive Proxy Statement”) for information
regarding the members of the “Trian Group.” Nelson Peltz
beneficially owns Disney shares worth approximately $3.5 billion
and Jay Rasulo owns Disney shares worth approximately $800,000, in
each case as further detailed in the Definitive Proxy Statement.
Note that ownership position values are based on Disney’s share
price at the close of business on March 20, 2024.
Trian has neither sought nor obtained consent from any third
party to use previously published information in this press
release, including any quotes used in this press release.
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