By Svea Herbst-Bayliss and Dawn Chmielewski
(Reuters) -Activist investor Nelson Peltz on Thursday ended his quest for a board seat at Walt Disney Co after Chief Executive Bob Iger laid out plans to fix the home of Mickey Mouse, cheering investors.
“The proxy fight is over. This is a win for all shareholders,” a spokesperson for Peltz’s Trian Fund Management said on Thursday.
The decision came only hours after Disney reported earnings that topped Wall Street expectations and Iger outlined a corporate restructuring that addresses many of Peltz’ criticisms.
After weeks of trading increasingly personal barbs, Peltz extended an olive branch to Disney saying he congratulated the company and its CEO on new “operating initiatives” that dovetail with his thinking.
Disney issued a statement, applauding Peltz’s decision.
“We are pleased that our Board and management can remain focused without the distraction of a proxy contest,” Disney’s board of directors said in a statement. “And we have tremendous faith in Bob Iger’s leadership and the transformative vision for Disney’s future he set forth yesterday.”
Disney’s stock price climbed in early trading on Thursday but pared some gains to be up 1.5%. Since the start of the year, the stock has risen nearly 30%.
Trian owns a nearly $1 billion stake in Disney and had criticized the company for a bungled succession planning, overpaying for new assets and runaway costs.
Peltz was trying to rally shareholders to vote him onto Disney’s board, arguing that he had the experience, after sitting on 11 boards, to help turn the company around. Disney disagreed and said he did not have the skills needed to aid the media conglomerate.
The proxy contest was quickly shaping up to be one of the year’s biggest and most contentious with a billionaire investor facing off against a chief executive who was widely admired in Hollywood.
Iger, who came out of retirement in November to return to Disney, on Wednesday dazzled Wall Street on his first earnings call since replacing Bob Chapek, who was fired in last year after the company in November reported a 66% drop in quarterly profit.
Iger addressed points Peltz had raised in his proxy battle and said Disney is cutting 7,000 jobs and reorganizing into three divisions – an entertainment unit encompassing film, television and streaming, a sports-focused ESPN unit and one with parks, experiences and products.
Analysts said Peltz made a reasonable request for one board seat and to join the 12-member board himself. But after the most recent earnings and reorganization, they handicapped his chances as poor for winning an expensive and time-consuming contest.
People familiar with Peltz’ thinking said he felt he did not need to waste his time or money on fighting a battle whose odds of winning had just declined. Peltz appeared on CNBC Thursday to announce his proxy fight with Disney was over.
Peltz’ reversal will give Iger and management some room to breathe. “Iger has a lot on his plate,” said LightShed Partners media analyst Rich Greenfield. “And an activist just takes time away from figuring out Disney’s future.”
Early reaction from Wall Street analysts about Disney’s moves was positive.
“While we are encouraged by Bob Iger’s strategic vision for Disney, this is clearly the first phase in Disney’s transformation, which will require adept execution,” wrote Bank of America media analyst Jessica Reif Ehrlich in an investor note. “Bob Iger has a long, strong track record which provides confidence he will manage this transition for Disney.”
(Reporting by Svea Herbst-Bayliss in New York, Dawn Chmielewski in Los Angeles, Tiyashi Datta in Bengaluru; Editing by Mark Porter, Jan Harvey and Lisa Shumaker)
