Opinion: An Uphill Battle Could Await Trian as the Firm Snaps Up a Stake in Disney
CNBC (12/03/22) Squire, Kenneth
Ken Squire, founder and president of 13D Monitor, writes that Trian Fund Management could face an uphill battle in its efforts to engage Walt Disney (DIS). According to recent reports Trian took an approximately $800 million stake in Disney and may be interested in growing this stake. Trian is reportedly seeking a board seat, advocating for the company to make operational improvements and reduce costs, and it has expressed its opposition to Robert Iger’s reappointment as CEO. The calls for changes at Disney are very similar to what Dan Loeb and Third Point were advocating for at Disney earlier this year. On Sept. 30, Disney reached a deal with Third Point, including adding former Meta executive Carolyn Everson to its board of directors. On Nov. 11, Disney announced companywide cost-cutting measures and told division leaders that layoffs are likely. "So, a lot of what Trian is looking for – board change (particularly with former CEO Bob Chapek now off the board) and cost reduction – has either already happened or is in the process of happening," says Squire. Another thing about Trian, says Squire, is that it’s a very thoughtful investor, known for its detailed, comprehensive white papers. "The firm did not go into this without a plan and that plan was far from spontaneous or reactive. It was a plan that Trian has likely developed over many months. And it was presumably thrown for a loop when Disney announced that it replaced Chapek with former CEO, Bob Iger," writes Squire. "The fact that Trian had not yet built its full position when its holding was reported is more evidence that the firm felt it had to go public about its investment earlier than it wanted to in reaction to Disney’s announcement." Iger was an extremely respected and value-adding CEO at Disney for many years and the stock has reacted favorably to news of his return. So, it is interesting that Trian is reportedly opposing Iger’s appointment. Nor is the firm throwing its support behind outgoing CEO Bob Chapek. "Knowing Trian and knowing activists as we do, this could mean only one thing: Trian’s plan includes its own idea for a new CEO, something that would have been a lot easier to implement last week before Chapek was replaced by Iger," says Squire. "This is going to be an uphill battle for Trian. Disney recently reached a deal with activist investor Third Point and is not likely to settle with another activist for a board seat, particularly in light of all of the changes it has already made. Moreover, Trian would likely want Nelson Peltz or Ed Garden to be the firm’s representative on the board and Nelson is already on three public company boards and Ed is on two. Disney is definitely in need of serious change, but in the past three months the company has announced a cost-cutting plan, refreshed the board, and changed its CEO. It is not unreasonable to see if these initiatives work before considering additional changes. If Disney does not offer a seat to Trian, the firm would have to resort to a proxy fight to gain a seat, which it is unlikely to win on a platform of more change and opposing Bob Iger as CEO." More will soon be revealed, as Trian has until Dec. 9 to nominate directors for the 2023 annual meeting of shareholders.
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