Nelson Peltz's Trian Fund Management is moving ahead with a proxy fight at Disney (DIS).
The activist hedge fund said in a press release on Thursday morning that Disney extended an offer to Trian to meet with the board but turned down its recent request for representation, including for Peltz himself. The firm said it now intends to take its case directly to shareholders.
According to a source familiar with the matter, Trian is seeking multiple board seats at Disney. Peltz has an ally in former Marvel executive Ike Perlmutter, who has entrusted his stake in the company to Trian.
"Disney's share price has underperformed proxy peers and the broader market over every relevant period during the last decade and over the tenure of each incumbent director. Investor confidence is low, key strategic questions loom, and even Disney's CEO is acknowledging that the Company's challenges are greater than previously believed," Trian said.
Disney pointed to its cost-cutting efforts in the past year in a statement in response.
"Over the past twelve months, we restructured the company to restore creativity to the center of all our businesses as we significantly reduce costs and drive efficiencies, and we are on track to achieve about $7.5 billion in cost savings — $2 billion more than our original target," the company said.
Disney also noted that Perlmutter owns 78% of the shares that Peltz claims beneficial ownership of, which amounts to more than 25 million of 33 million shares.
"This dynamic is relevant to assessing Mr. Peltz and any other nominees he may put forth as directors, as Mr. Perlmutter was terminated from his employment by Disney earlier this year and has voiced his longstanding personal agenda against Disney’s CEO, Robert A. Iger, which may be different than that of all other shareholders," Disney said.
Trian's statement comes a day after Disney announced in an SEC filing that James Gorman, chairman and CEO of Morgan Stanley, along with Jeremy Darroch, former head of British television company Sky, will join its board early next year.
"While James Gorman and Sir Jeremy Darroch represent an improvement from the status quo, the addition of these directors will not, in our view, restore investor confidence or address the root cause behind the significant value destruction and missteps that this Board has overseen," Trian said.
Iger: 'I’m not going to get distracted' by activists
Iger has not had an easy road since stepping back into the CEO position one year ago. Since that time, Disney's stock has hit multiyear lows. The company's parks business is slowing, its linear TV division is declining, and its streaming business is not yet profitable.
There have also been more misses than hits at the box office as investors question whether or not Disney has lost its magic.
"We have to obviously contend with them in some form," Iger said of Peltz and Trian at the New York Times' DealBook Summit on Wednesday. "I’m certain that the board will hear them out in terms of what their plans are, what their ideas are."
Still, Iger said he's not focused on the activist fight in the near term: "I have a lot to do. I’m not going to get distracted by any of that."
Peltz ended a previous proxy battle against Disney in February after the company committed to various cost-cutting initiatives, which included layoffs, in addition to restructuring the business, establishing a succession planning committee, and revealing plans to reinstate its dividend by the end of the calendar year.
Peltz had said Iger needed to execute on his plan — but, with the stock falling nearly 20% since the end of Peltz's previous proxy battle, it's clear shareholders want to see more from the entertainment giant.
"It puts a lot of pressure [on Disney]," Needham analyst Laura Martin told Yahoo Finance Live after Peltz first renewed his fight against the company.
"He owns enough that I don't even know if he needs to get board seats to actually get something done here and make money on his investment. We'll see. But worst case, you'll have an activist in the boardroom who will be much more short-term focused than anyone currently on the board," she warned.
Amid the activist fight, Disney announced late Thursday it will bring back a cash dividend of $0.30 per share following a three-year suspension. Shareholders of record at the close of business on December 11 will receive the payments, which will be made in January.