Disney has a new chairman — and a proxy fight on his hands

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“The only constant in life is change,” says the old saying. It seems particularly apt when applied Walt Disney (dis 3.81%) In recent months.

In late November, Disney shareholders sent a collective cheer at the return of iconic CEO Bob Iger, who returned to helm the House of Mouse after a nearly two-year hiatus. Iger began work immediately, unleashing a massive restructuring that former CEO Bob Chapek had begun before his public ouster. Several other recent developments bear Iger’s fingerprints, including some fan-friendly changes to theme park policies and requiring employees to return to the office at least four days a week.

Today, two new The development greeted Disney investors. The company has elected a chairman of the board, and an activist investor is fighting the house that Mickey built.

The show will be hosted by Mark Parker

Disney’s board of directors announced late Wednesday that it has named Mark Parker as its new board chair, replacing the outgoing Susan Arnold — who has reached Disney’s term limit.

Parker is the executive chairman Nike and was CEO of a shoe manufacturer for 13 years. He has been an independent director at Disney for the past seven years. Parker will also lead the board’s succession planning committee, tasked with finding an eventual replacement for Iger, whose current term as CEO ends in two years.

In a statement accepting the role, Parker addressed the elephant in the room by saying (emphasis added), “I am honored to have the opportunity to serve as chairman of Disney, and I look forward to working closely with Bob and his management team. Growth strategy that balances investment with profitabilityParker also said one of his top priorities will be identifying a successor after Iger’s current two-year term ends. It’s worth noting that Parker has experience managing a chief executive transition after doing so at Nike.

Acting for change

In another development, Disney announced that activist investor Nelson Peltz of Trian Fund Management is looking to pick a proxy fight. Trian has amassed a stake in Disney worth more than $100 million, according to The Wall Street Journal. The fund wanted Peltz to get a seat on Disney’s board, but the company refused. Disney said its board had “engaged with Mr. Peltz numerous times over the past several months,” but could not come to an agreement after several overtures.

Shortly after Disney’s announcement, the Trian Fund publicly nominated Peltz for election to Disney’s board. The matter will be finally decided by Disney shareholders at the company’s annual meeting next month. The company urged investors to vote on Disney’s slate of director nominations.

Peltz is a well-known activist investor who hasn’t shied away from going after big goals. He has accepted it before Proctor and gambling, General electricalAnd DuPontwith mixed success.

Trian and Peltz began a public campaign and presentation entitled “Recovering the Magic”. He cited recent stock price declines and financial performance as evidence of mismanagement, calling Disney “a company in crisis.” Peltz accused the company of inadequate succession planning, excessive compensation and a lack of spending discipline, among other alleged deficiencies. Peltz also called Disney’s streaming strategy “flawed” and is pushing for Disney to reinstate its dividend by 2025.

Only constant changes

These developments come at a time of great change for Disney. The company’s theme park business has largely recovered from its pandemic-induced slump, although investors have largely focused on Disney’s direct-to-consumer (DTC) business.

The division is adding subscribers at a healthy clip, with more than 12 million joining the ranks of the company’s flagship service, Disney+, in its fiscal 2022 fourth quarter (which ended Oct. 1). Combined, Disney+, Hulu and ESPN+ had 236 million subscribers, surpassing the streaming pioneer. NetflixWhich has a total of 223 million.

Unfortunately, investors were concerned about the high cost of acquiring these customers, sending Disney stock lower in light of the results. The DTC segment generated $19.5 billion in revenue last year but posted a loss of more than $4 billion, primarily the result of its significant investment in Disney+ content. The company noted that Disney+ was on track to achieve profitability by 2024.

The organization faces other challenges. The ongoing phenomenon of cord-cutting has reached epic proportions, while the cost of programming at ESPN is skyrocketing.

On the other hand, investors should remember that Disney has a 100-year history of success in dealing with an ever-changing audience, changing technology and overcoming economic headwinds. Moreover, the company has warned investors that it will spend heavily to make Disney+ a streaming competitor, which it has achieved much faster than many imagined.

The bear market did not distinguish between quality companies and their inferior peers, with most stocks at their peak. Given its track record of success and position as an industry-leading media company, Disney will undoubtedly regain its magic. And with a price-to-sales ratio of less than 2, Disney stock is a bargain.

Danny Venner has positions at Netflix and Walt Disney. The Motley Fool has positions on and recommends Netflix, Nike, and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney, long January 2025 $47.50 calls on Nike and short January 2024 $155 calls on Walt Disney. Motley Fool has a revealing policy.


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