By Dawn Chmielewski
(Reuters) - Activist investor Trian Fund Management on Thursday pushed in a regulatory filing for election of its nominees to Walt Disney (NYSE:DIS)'s board of directors, saying fresh perspective can help restore "the magic" to the entertainment company.
Trian noted Disney's per-share earnings in its most recent fiscal year were lower than a decade ago, despite more than $100 million in invested capital. Profit margins of Disney's streaming business lag peers like Netflix (NASDAQ:NFLX), it observed.
In a statement accompanying the filing with the U.S. Securities and Exchange Commission, Trian CEO Nelson Peltz said Disney's legacy board lacks an "ownership mentality," failed to lift the streaming business to profitability or improve the quality of studio content, and "repeatedly failed" to plan for a successor to CEO Bob Iger.
"Are Disney shareholders really to believe the current Board is able to heal these self-inflicted wounds?” Peltz said. "We respectfully believe the answer to that question is 'no' and we will seek the support of shareholders for meaningful change in the board's composition."
Trian said its nominees, Peltz and former Disney Chief Financial office Jay Rasulo, bring brand expertise, financial acumen and a "shareholder-first" mindset.
"We believe restoring the magic at Disney starts with a focused, aligned and accountable board, intensely committed to returning an ‘ownership mentality’ to the boardroom," Rasulo said in a statement. "That, and a heavy dose of best-in-class corporate governance is the medicine Disney needs to fix its ailing shareholder returns.”
Two days ago, Disney laid out its arguments for rejecting the activist shareholder's nominees to the board. It said the company has embarked on an "unprecedented transformation," making management changes and streamlining operations to become more cost-efficient. It said Peltz has "not actually presented a single strategic idea" for Disney, and lacks relevant media and technology experience, and Rasulo has held no other executive position at a public company since leaving Disney in 2015 after being passed over for the role of chief operating officer.
Peltz said Disney refused to "seriously engage" with Trian, despite the fund's beneficial ownership of $3 billion worth of common stock.
The activist shareholder's filing provides details of its relationship with Isaac "Ike" Perlmutter, the former Marvel Entertainment chairman who Disney fired last March in a reorganization.
Trian Management has an investment agreement with the former Disney executive, in which it holds voting control of Perlmutter's 25.6 million Disney shares -- effectively giving Peltz beneficial ownership of 32.3 million Disney shares.