© Reuters. FILE PHOTO: A screen displays the logo and symbol of The Walt Disney Company on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 14, 2017. REUTERS/Brendan McDermid/File Photo
By Svea Herbst-Bayliss
(Reuters) -Activist hedge funds ValueAct Capital and Blackwells Capital moved on Wednesday to back Walt. disney (NYSE:) Co as it defends itself against a board challenge from a third activist investor, Trian Fund Management.
The unusual turn in the battle over Disney's board underscores how high is at stake in the company's turnaround bid under Chief Executive Bob Iger.
Iger led Disney from 2005 to 2020 and returned to the helm in November 2022 as investors punished the company's stock for a $1.5 billion quarterly loss in its streaming division and the poor performance of many of its film franchises.
Disney said Wednesday it had reached an agreement with ValueAct to advise it on strategy and support its director candidates at its annual shareholder meeting.
Separately, Blackwells said it has nominated three directors to Disney's board who, unlike Trian, support the company's strategy, confirming an earlier Reuters report.
“ValueAct has a history of collaboration and cooperation with the companies it invests in, and its co-CEO Mason Morfit has been very constructive in the conversations we have had over the past year,” Iger said.
Disney confirmed Blackwells' nominations and said its governance and nominating committee would review the candidates and make a recommendation.
“Disney has an experienced, diverse and highly qualified board of directors that is focused on the company's long-term performance, strategic growth initiatives including the continued transformation of its businesses, the succession planning process and increasing value for shareholders,” he said.
Late last year, Trian CEO Nelson Peltz nominated himself and a former Disney CFO, James Rasulo, to Disney's board of directors, positioning himself as the people the media giant and the Entertainment needs to cut costs, design a CEO succession plan and revamp the group's streaming operations.
Trian said he welcomes other shareholders trying to help “fix” Disney, but said they “need Nelson Peltz and Jay Rasulo as independent voices and catalysts for much-needed change on what has been an underperforming Board.” chronically deficient”.
Blackwells disagreed that Peltz and Rasulo should win seats, noting that “if anyone is needed it's the Blackwells' nominees.”
The firm also called Disney's deal with ValueAct “a disappointing defensive measure…Providing all shareholders with a real, better choice for directors is the necessary act that will support Disney's future success.”
ValueAct has known the Disney team for more than a decade and has been in contact with management as it raised its stake in recent months, sources told Reuters in November.
Sources said he sees room for the company's share price to roughly double. On Wednesday, Disney's stock price rose 1%, but its shares have lagged the market over the past year, gaining 5.5% versus the broader market's 22% gain.
The investment firm, which has long preferred to work with target companies out of the spotlight, has experience in the media sector.
He previously held a position on the board of directors of 21st Century Fox and supported the company when it sold its entertainment assets to Disney.
A year ago, ValueAct co-CEO Mason Morfit was invited to the Salesforce (NYSE:) board of directors and helped defuse a brewing fight between the enterprise software maker and a handful of activists threatening a fight for power.
ValueAct has seats on the boards of approximately half of its portfolio companies. Morfit said in a statement that “we couldn't be more excited to partner with Bob (Iger) and the board of directors to help create long-term sustainable value for shareholders.”
In an effort to mitigate the board challenge, Disney already revamped its board in November, naming former Morgan Stanley CEO James Gorman and former SKY CEO Jeremy Darroch as directors.
