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Disney's fight with Nelson Peltz is about to come to a head. Here's where things stand.

Bob Iger, Nelson Peltz
Disney CEO Bob Iger and Nelson Peltz, the CEO of Trian Partners, have been embroiled in a proxy battle.Neilson Barnard/Getty Images; David A. Grogan/Getty Images
  • Disney shareholders will vote for the company's board at its annual meeting on Wednesday.

  • The vote will bring to an end a proxy fight between CEO Bob Iger and Trian's Nelson Peltz.

  • Disney management seemed to have the upper hand ahead of the meeting but it's a tight race.

The battle between Disney CEO Bob Iger and Nelson Peltz, the CEO of Trian Partners, an activist-investor hedge fund, will come to a head on Wednesday when House of Mouse shareholders finally have a chance to weigh in on the proxy fight that's been going on for more than a year.

Shareholders' decisions at the annual meeting could serve as a referendum on the future of Disney.

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A vote for Disney's slate of board members would show support for Iger's performance as CEO since he returned to lead the company in November 2022.

A vote for the self-professed "bully billionaire" Peltz and Jay Rasulo, Disney's former chief financial officer — and for removing Maria Elena Lagomasino and Michael Froman, two company directors, from the board — would be seen as a rebuke of management's strategy.

It's the culmination of months of tussling between Disney and Peltz, who has been waging war against Disney's board since January last year. Trian's argument centers on Disney's share price (which is down about 40% from a March 2021 peak of about $202), the debt it took on following its $71 billion acquisition of 21st Century Fox, losses in its streaming division, and its botched succession plan.

Disney, in turn, has forged ahead with its strategy under Iger, announcing first-quarter earning results that beat Wall Street's expectations in February alongside a $1.5 billion investment in Epic Games, the company behind "Fortnite," to cater to younger generations.

Jason Schloetzer, a professor at Georgetown University's McDonough School of Business, told Business Insider that backing Peltz's slate of directors would be "a vote to shake things up."

"It's saying that the strategy is either OK or needs to be tweaked and that acceleration and implementation need to speed up," he added.

But ahead of the shareholder meeting, it appears that Disney's current board will pull through, though the decision could hinge on how Vanguard, Disney's largest shareholder with about 8% of the company's stock, votes.

On Monday, The Wall Street Journal reported that BlackRock and T. Rowe Price, the former of which is Disney's second-largest investor with about 4.2% of shares, were throwing their votes behind Iger. Other prominent shareholders, including the investment firm ValueAct Capital, Walt and Roy Disney's heirs, Laurene Powell Jobs, and the "Star Wars" creator George Lucas, have also come out in support of the company's management.

"Creating magic is not for amateurs," Lucas said in a statement last month. "When I sold Lucasfilm just over a decade ago, I was delighted to become a Disney shareholder because of my long-time admiration for its iconic brand and Bob Iger's leadership."

Still, the battle has been closer than Disney would like, as evidenced by the $40 million it has reportedly spent appealing for votes — particularly those of retail investors, who hold about 40% of Disney's shares, according to The New York Times.

Disney has run persuasion campaigns featuring characters like Pinocchio and Donald Duck's uncle, Ludwig Von Drake. Iger and other executives have spent weeks meeting with and calling major shareholders.

"If Disney wasn't concerned about losing one or two board seats here, they wouldn't be as aggressive and public about pushing back," Schloetzer said.

Trian, which controls about 1.8% of Disney shares — most of them belonging to Ike Perlmutter, the disgruntled ex-chairman of Marvel — has spent eight figures on its campaign, publishing white papers and taking to social media with satirical animations of Disney's cast of characters.

That may be paying off. On Monday, the institutional investors Neuberger Berman and the California Public Employees' Retirement System threw their support behind Trian. And Institutional Shareholder Service, a proxy advisory firm, recommended shareholders vote for Peltz, though not Rasulo.

Peltz first waged war against Disney's board in January 2023, though he halted his bid for a seat a month later when the company agreed to cut costs and lay off 7,000 employees.

"We wish the very best to Bob, this management team, and the board," Peltz said on CNBC at the time. "We will be watching. We will be rooting."

By November, he'd reversed course, launching a sequel to his original bid for seats and continuing to fight even after Disney's stock jumped in February.

"It's déjà vu all over again. We saw this movie last year and we didn't like the ending," Peltz said at the time.

If Peltz and Rasulo do get board seats, it's not entirely clear how much sway they'll have. Trian has said its main priorities are to improve streaming margins to match Netflix's and help create a CEO succession plan. Some have suggested he may carve up Disney's assets — ABC, ESPN, and its theme parks, among others — and Peltz has said he wants to make changes to its movie strategy.

"Why do I have to have a Marvel that's all women?" he said in a Financial Times interview last month. "Not that I have anything against women, but why do I have to do that? Why can't I have Marvels that are both? Why do I need an all-Black cast?"

In the face of all of this, Iger has remained outwardly confident — particularly after strong first-quarter earnings seemed to restore his signature swagger.

"The last thing that we need right now is to be distracted in terms of our time, our energy, by an activist or activists that, frankly, have a completely different agenda and don't understand our company, its assets, even the essence of the Disney brand," he told CNBC at the time.

But if Peltz does pull an upset, Schloetzer said, "that's when it gets interesting."

Read the original article on Business Insider