The Walt Disney Company, a titan in the media industry, has announced the reinstatement of its dividend, marking a significant step in its post-pandemic recovery strategy. This move comes amidst escalating tensions with activist investor Nelson Peltz and his fund, Trian Partners, who have been vocal critics of Disney’s current management and strategic direction.
Disney’s decision to restore its dividend with a 30-cent per share payout for the second half of its fiscal year reflects its efforts to regain investor trust. This action, effective from January 10 for shareholders on record as of December 11, is seen as a response to the ongoing pressure from Peltz, who has been pushing for improved performance and a resumption of the dividend. The announcement led to a modest increase in Disney’s shares in extended trading, indicating a cautious optimism among investors.
Ongoing conflict with Trian fund management
The dividend news coincides with growing friction between Disney and Trian Fund Management. Co-founded by Peltz, Trian is seeking more influence over Disney’s board, demanding more than two board seats. This conflict follows Disney’s recent appointments of Morgan Stanley CEO James Gorman and former Sky TV boss Jeremy Darroch to its board, perceived as a countermove to Peltz’s aggressive stance.
Disney’s recent performance and Trian’s critique
Disney’s performance has been a point of contention, with its shares lagging behind the broader market. The dividend reinstatement is part of a broader strategy to boost investor confidence. Despite these efforts, Trian remains critical, emphasizing the need for significant changes to reverse what they call a trend of value destruction under the current leadership.
Adding complexity to the situation, Trian claims ownership of approximately $3 billion in Disney stock, with a portion owned by Ike Perlmutter, a former Marvel boss and ally of Peltz. Disney earlier dismissed Perlmutter and has been critical of Iger’s leadership. Disney’s statements suggest that Perlmutter’s grievances against CEO Bob Iger add another layer to the corporate drama.
Disney’s focus on key business areas
Amidst these boardroom battles, Disney is refocusing on crucial business segments like theme parks, ESPN’s upcoming streaming service, and improvements in its studio business. The unfolding boardroom conflict and its implications for Disney’s future strategies are being closely watched by investors and industry analysts.
Trian Partners, owning a significant stake in Disney, has revived its attempt to secure representation on the company’s board. Peltz, who previously halted a similar effort, has now taken his case directly to shareholders after Iger again turned down Trian’s request for board seats.
Disney’s response to Trian’s push
In response to Trian’s demands, Disney has defended its track record and current transformation efforts. The company highlights its restructuring efforts, aiming to place creativity at the core of its business and its commitment to achieving substantial cost savings. Disney also emphasizes its goal of enhancing profitability in its streaming business, elevating ESPN’s digital platform, and boosting its film studios’ output and economics.
Financial outlook and corporate governance
Disney boasts one of the media sector’s strongest balance sheets and anticipates its free cash flow to approach pre-Covid levels by fiscal 2024. The company reassures its commitment to long-term success, benefitting all shareholders. However, Disney’s mention of Peltz’s collaboration with Perlmutter raises concerns about potential conflicts of interest and differing agendas from other shareholders.
As Disney navigates through this challenging phase, balancing investor expectations with strategic business goals, the outcome of this boardroom tussle will be critical in shaping its future. The company’s efforts to bolster its core businesses while managing shareholder interests and external pressures will be pivotal in maintaining its position as a leading entertainment company.
