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Trian Slams Disney’s ‘Scorched Earth’ Board Campaign as One ‘Calculated to Distract Shareholders’ From Studio Problems

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Nelson Peltz’s Trian Fund Management blasted Disney on Wednesday for “running a scorched-earth campaign that appears to be focused on deflecting attention from the Board’s failures.”

The statement noted that the activist investors “loves” the entertainment giant and “believes it has unparalleled assets and opportunities and every reason to grow and prosper.” It argues that its only objective in its proxy fight is to help Disney and its shareholders.

“Instead of recognizing our good faith and track record, Disney claims that we have a history of ‘attacking’”’ companies and have ‘“’infiltrated’”’ boards and we are seeking to create ‘maximum disruption.’ More unscrupulous still is Disney’s claim that our candidates (including Disney’s own former CFO) are ‘oblivious’ and that our ideas for improving the Company are ‘dangerous’ and ‘inane,'” the statement continued. “In our view, this charged and disingenuous rhetoric seems calculated to distract shareholders from Disney’s poor track record and sidestep accountability. So too is Disney’s focus in this campaign on Bob Iger and Ike Perlmutter.”

Trian also accused Disney of manipulating its analysis of the firm’s contributions to portfolio companies, adding that it has delivered 17% average annualized returns for its eleven investments where Peltz joined the board.

The memo is in direct response to a presentation released by Disney on Monday, which took aim at Peltz and former Disney chief financial officer Jay Rasulo’s track record, experience and understanding of the media industry.

It emphasized that Peltz and Trian’s other representatives have delivered total shareholder returns that underperform to the S&P 500 in roughly 68% of cases and that Rasulo’s tenure on the iHeart Media board has resulted in a 87% drop in the company’s stock price.

Additionally, Disney dropped a new presentation to investors on Wednesday in which it accused Trian of wasting valuable time and resources with its proxy fight, adding its white paper was “littered with false statement and inferences” and “widely criticized for lacking substance and being partially plagiarized from other activist presentations.”

It also slammed Trian’s “silent partner” Ike Perlmutter, who was let go from the company during its layoffs last year. Disney said Trian “neglected to address Perlmutter’s well-chronicled, difficult history” with CEO Bob Iger and other employees and has said little about his role and influence on the proxy fight.

Perlmutter has granted Trian sole voting power over his shares in the entertainment giant.

“It is not credible that Perlmutter is truly just sitting on the sidelines,” it added.

Trian said it does not oppose Iger’s reelection or his continued service as CEO. It also emphasized that Perlmutter is not on the ballot or seeking a board seat and will “not influence the fiduciary responsibilities of our candidates.”

“He owns more than $2.5 billion of Disney stock; he, like all shareholders, wants Disney to improve and create value. The relationship between Mr. Iger and Mr. Perlmutter is irrelevant,” the firm added. “Every drop of ink Disney spills on these subjects appears to be an attempt by the Board to avoid the topic at hand: the need for improved performance at Disney and change in the boardroom.”

It also reiterated that Disney has “significantly underperformed” its potential, its peers and the market and its plans to replace current board members Michael Froman and Maria Elena Lagomasino. It noted that during their tenures, Disney stock has fallen more than 20% and earnings per share have declined.

“In our view, Disney was slow to adapt to streaming, significantly overpaid for the Fox acquisition, has lagging media margins, is spending tens of billions on the Parks without a disclosed timeframe or plan, has announced term sheets to drive excitement on deals that are still being negotiated and has misaligned its executive compensation for more than a decade. Change is needed,” the message concluded. “Given Disney’s many competitive advantages, Trian is convinced Disney can outperform for shareholders in the future. To Restore the Magic at Disney, we believe the Board needs focused and aligned directors who are committed to helping to set ambitious goals and hold management accountable.”

In addition to knocking Disney’s latest war of words, Trian slammed J.P. Morgan and ValueAct Capital’s support of the House of Mouse.

“Notably, neither J.P. Morgan, Disney’s lead “activism defense” advisor, nor ValueAct, which has managed hundreds of millions for Disney’s pension fund, have anything to say about Mr. Froman, Ms. Lagomasino or Disney’s other non-management directors. Parties to lucrative arrangements are typically happy to say nice things about their client’s CEO,” it said. “The fact is that shareholders have been left in the dark about how many millions of dollars the firms making these endorsements have and will be paid. Irrespective of the paid endorsers or harsh rhetoric it uses, Disney cannot convince us, or, we suspect, our fellow owners, that the Company is performing well.”

Peltz and Rasulo will stand election at Disney’s annual shareholder meeting on April 3.

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