Disney looks to fend off Peltz board push with new ValueAct Capital pact

Walt Disney  (DIS) – Get Free Report shares edged higher Wednesday after the media and entertainment giant agreed to a deal with ValueAct Capital Management that would support its effort to fend off activist investor Nelson Peltz.

Billionaire activist Peltz, through his Trian Fund Management investment vehicle, for more than a year has been pushing for changes at Disney and is seeking a seat on the board. 

Disney has pushed back, saying its efforts to cut costs, align its operations and shed some legacy assets are the best path forward under interim CEO Bob Iger. 

The newly agreed pact with ValueAct, another activist investor that has a history of working collaboratively with its target companies, could help Disney defend itself against Peltz’s push for board seats. And it could give the company more time to lay out a new strategy to increase profits and revive its moribund stock price.

Disney said it would consult with ValueAct on strategic matters “including through meetings with the Disney board and management.” The investment group also confirmed it would support Disney’s slate of board nominees at the annual meeting.

“ValueAct Capital has a track record of collaboration and cooperation with the companies it invests in, and its co-CEO, Mason Morfit, has been very constructive in the conversations we’ve had over the past year,” Iger said in a statement. “We welcome their input as long-term shareholders.”

Disney shares were marked 0.25% higher in premarket trading to indicate an opening bell price of $90.94 each. That move would leave the stock up 2% for the past year and down more than 17% over the past five years, compared with a 61% gain for the Dow benchmark. 

Disney looking to boost cash flow

Late last year Disney posted mixed fiscal-fourth-quarter earnings but forecast significant cash-flow gains, alongside deeper cost cuts, that could restore the group’s dividend over the coming year.

In what was seen as both a nod to activist demands and a key plank in its turnaround efforts, Disney also broke down the group’s profits into three major segments. The ESPN-lead sports division reported as a stand-alone division for the first time in company history.

Disney also said it would accelerate its cost-cutting program by around $2 billion, taking it to $7.5 billion a year, and lower its content spending by around $2 billion. Collectively, Disney said that would help it grow free cash flow “significantly,” later adding it saw that total at around $8 billion. 

Peltz, in the meantime, is reportedly working with the support of a former Disney executive, Isaac Perlmutter, to gain seats on the entertainment giant’s board.

Peltz and Trian abandoned a proxy fight in February after Iger said “everything’s on the table right now” with respect to the group’s 66% stake in Hulu. Peltz had said Disney should either buy the entire platform or exit streaming altogether. 

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