Introduction

Earlier this year, Trian Partners had accumulated a significant stake in Disney. The activist’s move came after years of stagnation, a failed CEO-succession process, and an increasingly competitive business environment.

With the return of longtime CEO Bob Iger, Disney announced plans to cut costs and restructure the organization to increase operational efficiency. While these developments satisfied Peltz initially (causing him to reduce his stake as Disney’s stock appreciated), performance has subsequently started to deteriorate once again.

After less than a year, Trian Partners is now back at Disney. This time, it’s got fresh firepower to support its case for change.

Ongoing Developments

Upon Iger’s return, the company launched a bold restructuring plan to rein in operating costs. So far, the company is on track to exceed the $5 billion of cost savings which it promised to investors.

In the streaming business, Disney is now on a path to profitability in fiscal year 2024. The company raised the price of its Disney+ and Hulu streaming products in August. Iger has also stated that the company is exploring options for its television business, which could imply the sale of this declining segment. More specifically, Iger stated that the traditional cable and network TV assets “may not be core” to the company’s business.

With regards to its theme parks, Disney has vowed to double its investments to nearly $60 billion over the next 10 years. The company seeks to integrate film franchises such as “Frozen”, “Avatar”, “Coco”, etc. into its live experiences to revitalize attendance.

The Return of Trian

Since avoiding an outright proxy fight earlier this year, Peltz has rebuilt his stake in the media giant to the tune of $2.5 billion. And this time, the activist is potentially seeking multiple seats on the company’s board of directors.

The move comes as Trian witnessed Disney’s share price decline over most of the year, from a high of $113 to around $80 (nearly a decade-low). Since Peltz held off on his activist campaign back in February, Disney’s stock has fallen over by 20%.

Next Steps

Looking ahead, tensions could rise as the company’s 2024 annual general meeting comes around the corner. If the two sides cannot come to a settlement before the meeting, then Trian would be expected to launch a proxy fight to gain more representation on the board.

In a contested situation, either Trian or Disney could acquire shareholder voting rights to gain an edge. Support for the activist could be mitigated by moves from the company to appease other investors, such as the reinstatement of the company’s dividend.

Trian is the activist behind the largest proxy contest in history, back in 2017 at Procter & Gamble. In that situation, Peltz effectively won by gaining a seat on the company’s board. Over the next 2 years, PG’s stock outperformed with a cumulative shareholder return of ~45%.

If Trian does indeed seek to nominate individuals to the board, it will have to do so between December 5, 2023 and January 4, 2024, which is the company’s window for shareholder nominations. The activist firm believes that Disney’s stock is currently undervalued, and that market sentiment could improve if that company’s strategy, operations, and governance are enhanced.

For additional context, read our prior article on the Trian-Disney campaign from earlier this year.

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