Trian Responds to Disney's Latest Statements Regarding Proxy Battle

Trian has continued its back-and-forth with Disney as it’s now released another new statement.

What’s happening:

After Disney’s latest deck that says it is “correcting” Trian’s white paper, the firm has released another new statement to Disney shareholders.

For context:

Trian Fund Management has nominated two candidates, Nelson Peltz and Jay Rasulo, for election to the Board of Directors of The Walt Disney Company.
To accommodate their nominees, Trian opposes the reelection of two of Disney’s incumbent directors, Michael B.G. Froman and Maria Elena Lagomasino.
Trian and Disney have been advocating for their respective director candidates and soliciting votes from Disney shareholders ahead of the Company’s 2024 Annual Meeting of Shareholders, which will be held on April 3.

Trian issued the following statement regarding Disney’s recent communications during this election campaign:

Trian is disappointed that Disney is running a scorched-earth campaign that appears to be focused on deflecting attention from the Board’s failures.
Trian loves The Walt Disney Company and believes it has unparalleled assets and opportunities and every reason to grow and prosper. That is why the Trian Group is one of Disney’s largest shareholders, with a stake worth more than $3.5 billion. Trian’s only objective in this campaign is to help Disney and all its shareholders, just as Trian has sought to do during its 20-year history at more than two dozen well-respected public companies.
But instead of recognizing our good faith and track record, Disney claims that we have a history of “attacking” companies and have “infiltrated” boards and we are seeking to create “maximum disruption.” More unscrupulous still is Disney’s claim that our candidates (including Disney’s own former CFO) are “oblivious” and that our ideas for improving the Company are “dangerous” and “inane.”
In our view, this charged and disingenuous rhetoric seems calculated to distract shareholders from Disney’s poor track record and sidestep accountability. So too is Disney’s focus in this campaign on Bob Iger and Ike Perlmutter.
This election contest is not about Mr. Iger or Mr. Perlmutter. We do not oppose Mr. Iger’s reelection nor his continued service as CEO. Mr. Perlmutter is not on the ballot, is not seeking a Board seat and will not influence the fiduciary responsibilities of our candidates. He owns more than $2.5 billion of Disney stock; he, like all shareholders, wants Disney to improve and create value. The relationship between Mr. Iger and Mr. Perlmutter is irrelevant. Every drop of ink Disney spills on these subjects appears to be an attempt by the Board to avoid the topic at hand: the need for improved performance at Disney and change in the boardroom.
The fact is that Disney has significantly underperformed its potential, its peers and the market during the tenures of incumbent directors Michael B.G. Froman and Maria Elena Lagomasino, whom we seek to replace. During each of their directorships (until Trian began pushing for change), Disney’s stock was down more than 20%. During both of their tenures, the Company’s earnings per share have declined. Disney cannot and does not dispute this reality.
Instead, the Company’s Board has concocted a distorted picture of performance, splicing together stock returns from more than a decade before these directors were on the Board with results over the most recent 17 months, conveniently leaving out nearly three years in the middle. This is akin to a football team claiming it actually won the game by simply refusing to recognize all the points scored by the other team in the third quarter.
Worse still, Disney is trying to count “points” scored in the early 2000s, long before Mr. Froman and Ms. Lagomasino were even on the Board. Moreover, Disney would have shareholders compare the score against only its weakest competitors – those with just legacy media businesses – rather than against the group of peers that Disney has previously used to justify paying executives hundreds of millions. In our view, reporting the score this way is misleading.
Furthermore, Disney has manipulated its analysis of Trian’s contributions to portfolio companies. For the eleven Trian investments for which Mr. Peltz joined the board, these companies subsequently delivered 17% average annualized returns.
Disney also appears to be leaning on its investment bankers and commercial partners for public endorsements, when this campaign should be focused not on statements of highly compensated bankers and service providers, but on how shareholders can ensure good governance and oversight from the Board. Notably, neither J.P. Morgan, Disney’s lead “activism defense” advisor, nor ValueAct, which has managed hundreds of millions for Disney’s pension fund, have anything to say about Mr. Froman, Ms. Lagomasino or Disney’s other non-management directors. Parties to lucrative arrangements are typically happy to say nice things about their client’s CEO. The fact is that shareholders have been left in the dark about how many millions of dollars the firms making these endorsements have and will be paid.
Irrespective of the paid endorsers or harsh rhetoric it uses, Disney cannot convince us, or, we suspect, our fellow owners, that the Company is performing well. Disney claims that the “correct” way to measure a company’s performance is to look at the current stock price. So, we did, and the numbers speak for themselves: Disney has been on a losing streak for many years, underperforming its peers over one year, three years and five years; since the announcement and closing of the Fox acquisition; since the BAMTech acquisition, which Disney now claims was a milestone in its transformation; and since the launch of Disney+. Over what relevant period has this Board created value for shareholders?
In our view, Disney was slow to adapt to streaming, significantly overpaid for the Fox acquisition, has lagging media margins, is spending tens of billions on the Parks without a disclosed timeframe or plan, has announced term sheets to drive excitement on deals that are still being negotiated and has misaligned its executive compensation for more than a decade. Change is needed.
Given Disney’s many competitive advantages, Trian is convinced Disney can outperform for shareholders in the future. To Restore the Magic at Disney, we believe the Board needs focused and aligned directors who are committed to helping to set ambitious goals and hold management accountable.

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