The eagerly anticipated real-life adaptation of Snow White by Disney, initially set for launch this month, may experience delayed completion. Despite this, the show business behemoth has swiftly navigated another pressing matter.
On Wednesday, an attempted boardroom takeover by Nelson Peltz, the wealthy activist investor and Brooklyn Beckham’s father-in-law, was firmly resisted by the company. Disney’s 12 board members successfully secured re-election as shareholders largely dismissed Peltz’s bid to appoint himself and former CFO of Disney, Jay Rasulo, to key positions.
In January 2023, Peltz’s Trian Fund Management, renowned for its activism in major consumer goods companies such as Unilever, Procter & Gamble, Heinz, and Mondelēz, acquired preliminary stock in Disney and promptly initiated a conflict. Disney splashed nearly $40 million (€36.9m) on a campaign to influence the voting outcome in this proxy battle.
Trian Fund Management lambasted Disney’s “extravagant” executive compensation, costly purchases, and disputable succession arrangements. Only two months prior, the entertainment corporation had coaxed former CEO Bob Iger out of retirement to take over from his replacement, Bob Chapek, after a turbulent 33-month stint during which the stock plummeted by nearly 30 percent.
Iger’s acquisition of 21st Century Fox, costing a whopping $71 billion (publicised in 2017 and finalised in 2019), was characterised as “tactically misguided” and a burden on the company’s financial status by Peltz. Iger had previously invested over $15 billion in Pixar, notable for Toy Story and Monsters Inc; Marvel Entertainment, responsible for Spider-Man to Avengers franchises; and Lucasfilm, popular for Star Wars and Indiana Jones.
Disney is grappling with a net debt total of $32 billion. Although the company’s free cash flow – profit remaining after subtraction of running costs and investment – saw a rise to $4.8 billion in the prior year from $1 billion in 2022, it was still only half of the amount generated pre-Covid. Making matters worse, 2023 saw several unsuccessful film releases including ‘The Little Mermaid’ live-action reboot, ‘Indiana Jones’ 5th chapter and ‘The Marvels’. These underperformances impacted Disney’s studio operations causing an operating loss of $800 million and subsequently affecting the growth of streaming services Disney+ and Hulu, as well as theme park, store and merchandise licensing profits.
Furthermore, due to ongoing actors and writers strikes that stalled the majority of 2023’s Hollywood productions, Disney’s catalogue of releases for the coming year appears significantly leaner than normal. A notable impact is that the next installment in the Star Wars franchise won’t hit cinemas until 2026, a full seven years after the previous film was released.
Disney’s remake of Snow White, originally set for release this month, faced delays. Due to external controversy surrounding the casting choices, including Rachel Zegler, a Latina actress, in the lead role and a variety of actors of different races, genders, and heights to replace the seven dwarfs, the movie’s release date was pushed back by a year.
In November, Igor made a public admission that during his time away from Disney, the company had placed more emphasis on social perspective rather than storytelling. Igor stressed that the primary goal should be to tell engaging stories. This view received support from Peltz who lambasted movies like The Marvels and Black Panther for their emphasis on female and black superheroes.
On another note, the conflict within the company has seemingly proven beneficial for investors, asserted Laura Martin, an analyst at US investment bank, Needham & Company, with the stock appreciating by 30% this year despite a 5% fall just prior to the annual general meeting.
Peltz discontinued his proxy battle for months last year only to resume it in November. His company, Trian, reportedly spent a close approximation of $25 million in their campaign, while associated activist Blackwells Capital parted with roughly $6 million. Including Disney’s participation, this makes it the most costly proxy battle ever.
Despite the conflict, all shareholders have reaped benefits, according to Laura Martin, an analyst with American investment bank, Needham & Company. Notably, even though the stock has declined by 5% on the eve of the AGM, it has experienced an overall increase of 30% this year.
With Peltz in the wings, Disney unveiled several well-received updates in the early part of February. They announced a substantial dividend, a $3 billion stock repurchase, a $1.5 billion input into the company that developed the online video game Fortnite, and their plans to begin a streaming service for ESPN sports using Disney+. Disney’s CEO Iger also raised the company’s cost reduction goal and is aiming to reach a point of financial equilibrium in their streaming service later this year.
Laura Martin stated her belief that “Trian and Blackwells have accelerated the recovery process but have not contributed anything of substance.” She also mentioned the continued obligation of the company “to generate shareholder profit” beyond the AGM.
Meanwhile, Barclays analyst Kannan Venkateshwar worries that this newfound emphasis on cost could lead to future problems. In a recent report, he mentioned the paradox of “Disney attributing its lack of innovation to an overabundance of content, despite producing less content than most major studios and streaming services.”
Recently, Bank of America analyst Jessica Reif Ehrlich elevated her estimated share price of Disney to $145, promising a 24% increase in her earlier prediction and stating that it appears Iger is now fully in charge. Despite having Iger successfully in control, the concern regarding who will succeed him, considering he’s 73, still lingers. Additionally, some speculate that finding a creative direction may become difficult while accounting professionals seize control in the firm.
Martin from Needham has fished out an effective resolution. “Our recommendation is for Disney to consider selling itself to tech giants such as Apple or Amazon,” she expressed. However, she conveyed that this deal would require approval from a Republican president. Peltz, holding a 1.8 per cent share in Disney valued at $3.9 billion, may find himself with a lucrative deal if Disney is sold to one of these Tech giants, assuming Trump were to regain power. Peltz’s opinion on Trump has varied in the past, but his latest endorsement for his Palm Beach neighbour – describing him as the “only option left” to the Financial Times – isn’t exactly effusive.