This channel predicted 6 days ago Nelson Peltz was not done with remaking Disney. Now Reuters agrees with an article explaining why they feel the same way! Without revenues up at Disney, until the ‘flywheel’ is restored (that’s what generates growing revenues) Peltz is almost certain to return to attacking management and their destruction of intellectual properties for ideological purposes.
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Disney clash with activist Peltz will have sequel
https://www.reuters.com/breakingviews/disney-clash-with-activist-peltz-will-have-sequel-2023-02-16/
NEW YORK, Feb 16 (Reuters Breakingviews) – Activist investor Nelson Peltz often plays a long game. So his truce with Walt Disney (DIS.N) last week, after a short bid to get a seat on the media group’s board, might seem uncharacteristic. But earlier battles at Dupont (DD.N) and Procter & Gamble (PG.N) suggest that such plot twists aren’t out of the ordinary, raising the possibility that Peltz may still get what he asked for.
Disney Chief Executive Bob Iger unveiled $5.5 billion of cost cuts last week when the $200 billion theme-parks-to-streaming company released fourth-quarter earnings. On the face of it, that was enough to get Peltz, who had complained about Disney’s over-the-top compensation practices and “lack of overall cost discipline”, to call off the dogs. “The proxy fight is over,” a spokesperson for his outfit Trian Fund Management told Reuters. Disney said it appreciated the decision.
The problem is that Peltz has only gotten half of what he typically wants. The New York-based activist carries a mug around his office that reads “sales up, expenses down.” Yet the challenge of getting Disney’s top line to grow faster, which Peltz sketched out in a presentation on a now-unavailable website “restorethemagic.com”, hasn’t been fully addressed. While revenue of $23.5 billion in the first fiscal quarter of the year was 8% higher than the previous year, subscribers on Disney+, the group’s streaming product, fell slightly. Revenue in the division that runs Disney’s traditional TV networks, like ABC and sports channel ESPN, was down 5% compared to the same quarter the previous year, to $7.3 billion.
Fixing this is far from simple. Disney+, the streaming business, faces serious competition from Netflix (NFLX.O). Overall, Iger’s firm burned more cash last quarter than it did a year earlier. True, Iger has options. A sale of ESPN has been suggested by another activist, Dan Loeb. Nor has Iger ruled out a sale of Hulu, another streaming platform in which Disney owns a 66% stake. For now, Peltz is apparently leaving Iger to decide whether shrinking is the best way to grow.
What makes this harder – and where Peltz could have made a difference – is that Disney’s governance is poor. Iger still needs to find a replacement for himself. Though he has agreed to leave after two years, Disney has a bad track record when it comes to succession. Iger’s previous stint as CEO saw him postpone his retirement four times, move to a new role as chairman, and then come back to his old job when successor Bob Chapek was ousted.
Granted, Peltz has already won enough at Disney to justify cooling his jets. The company’s decision to slash costs was significant, and it gives him an easy victory. The company’s shares are up 25% year-to-date. On one hand that means Peltz is likely to have made a handsome return. On the other hand, he ran the risk of losing the proxy fight had he pushed much further, since shareholders have less to complain about than when he started. Winning, visibly, is something activists like Peltz really care about.
For Disney shareholders still glum about the company’s performance – its shares are up 3% over the past five years, where the S&P 500 Index (.SPX) is up 50% – there’s still hope. Peltz’s history shows he doesn’t need to be in the boardroom to shake things up. One example is chemical maker DuPont. Peltz first revealed a stake in 2013 and two years later made a bid to get onto the board during the shareholder-meeting flurry that U.S. companies call proxy season. He lost. But he held on to the stock and pushed from the sidelines, and ultimately got what he wanted: the return of chieftain Ed Breen and a merger with Dow.
