Disney activist Nelson Peltz faces questions about Trian’s record

Earlier this week, Nelson Peltz attended daughter Nicola Peltz Beckham’s birthday party in Los Angeles.

This was not his only meeting with the Hollywood elite. On Tuesday, Peltz approached Disney executives, including Chief Executive Bob Iger, with a plan to reshape the entertainment group, restore dividends and repair what he described as a “broken” succession plan.

Peltz is set to take on Disney in the highest-profile proxy battle in years as he seeks shareholder support for a board seat. The co-founder of Trian Fund Management has been on a media blitz, comparing the company to communist China in a televised interview with CNBC, setting the tone for a long and bitter struggle.

Proxy battles are expensive affairs, with both sides spending millions of dollars to win shareholder support. They also tend to attract aggressive media campaigns and a lot of mudslinging.

Peltz is not an inventor. It will be his fourth legal battle since he founded Tria in 2005 with his son-in-law and chief investment officer Ed Garden and company president Peter May.

Those who know him say the 80-year-old investor, who gained fame by overhauling the consumer goods business, can be a ruthless competitor.

“He always starts by crushing and publicly humiliating management, as he did today on CNBC. Then he usually gets what he wants — in this case, a seat at the table,” said a second person who worked with Peltz. “Eventually, he becomes friends with them.”

Hong Kong Disneyland: Peltz compares Disney to communist China in TV interview with CNBC © Anthony Wallace/AFP via Getty Images

Such was the case in the first courtroom case of Peltz v. HJ Heinz in 2006. The activist sought five seats on the company’s board after CEO William Johnson rejected his turnaround plan, claiming he was mismanaging the company.

Peltz eventually won two boards, including one himself, and said at the time that he and Johnson would “smoke the peace pipe” and learn to work together. He remained a director until 2013, when the company was bought by Berkshire Hathaway and 3G Capital for $28 billion, a significant raise for investors.

Former Heinz board members would later vouch for Peltz in other proxy battles, including his bitter campaign at Procter & Gamble.

The 2017 battle became legendary on Wall Street. Peltz claims that the US consumer goods group spent more than $100 million to remove him from the board in what he calls the “dumbest thing” he has ever been involved in. The activist prevailed, and his tenure on P&G’s board was greatly appreciated. succeeded with the company’s stock price increasing by more than 50 percent.

But it helped Peltz be crowned as a consumer goods buzzkill that was unfit for the Disney fight. “[He] He’s a genius when it comes to consumer companies, but he’s not that perfect if he ever comes up with a track record,” said one person close to the investor.

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The Brooklyn-born investor failed at DuPont in 2015, when the company won the support of its three largest shareholders and a retail investor to overcome a board challenge. The chemicals group had offered Triana a seat on the board, but Pelts himself said he could not run, citing a lack of scientific expertise.

Peltz is facing similar challenges at Disney, which is taking advantage of its lack of experience in the media business. “It’s all about him and his ego,” said a person close to the company. “As always with him, you know there’s always a kernel of truth and there’s always some bullshit.”

Some Disney shareholders also think Peltz is not the right person to join the board.

“In our opinion, should someone with a half-percent position who has held shares for three months sit on the board?” said Dev Chakrabarti, chief investment officer of concentrated global growth at AllianceBernstein, a top 20 investor.

“Its track record in the consumer space is generally good,” Chakrabarti said, “but we don’t see it as a media operator.”

Peltz dismissed the notion that he was just a consumer goods guy, pointing to previous investments in Lionsgate, Time Warner and Comcast, although he was not a board director at any of those companies.

Peltz has come under pressure from his own investors over Tria’s performance, which has been mixed at times. The fund is down 10 percent in 2022, compared with a 19 percent decline in the S&P 500, according to people looking at the numbers.

New York Knicks forward Julius Randle and Toronto Raptors forward Precious Achiuwa compete during a basketball game.
Peltz sits on the board of Madison Square Garden Sports, the holding company of the New York Knicks © Nick Turchiaro/USA TODAY Sports via Reuters

Tria’s biggest failure was at General Electric, which one investor described as a “disaster.”

Trian amassed a $2.5 billion stake in the industry group in October 2015 when its shares were trading at around $25. He predicted GE’s stock price will almost double by the end of 2017 as it pushes for cost-cutting and share buybacks. Three years later, Tria’s share was worth about a quarter of its original value, and earnings were suffering.

If Peltz were to win a board seat at Disney, he would add to his current directorships at fast-food group Wendy’s, consumer goods maker Unilever and Madison Square Garden Sports, which owns the New York Knicks and Rangers sports teams. he has a personal stake.*

A longtime hockey fan and friend of MSG owner James Dolan, Peltz would play an unusual role in the sports world, both in media and team-level operations.

According to people on the other side of the negotiating table, Peltz is considered a fairly constructive activist investor.

“We’ve had some big fights in the past, but ultimately he’s focused on making things better and is reasonable behind closed doors,” said one person who has advised a company targeted by Peltz in the past. “He wants to be listened to and taken seriously, he’s not arrogant at all.”

Tria’s website is filled with testimonials from former board opponents. Johnson, the former CEO of HJ Heinz who fought against having Peltz on the board, later said he was impressed by the investor.

For his part, Peltz says he wants to roll up his sleeves and help Disney. “My ex doesn’t look at a Bloomberg screen,” he told the Financial Times. “My background is in business management.”

*This article has been amended to clarify that Peltz no longer has a board seat at Janus Henderson.

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