Disney activist Nelson Peltz faces questions over Trian’s record

At the start of this week, Nelson Peltz attended the birthday of his daughter Nicola Peltz Beckham in Los Angeles, a star-studded affair in which the activist investor was pictured rubbing shoulders with the former Disney actress Selena Gomez.

It was not his only date with the Hollywood elite. On Tuesday, Peltz addressed Disney executives including chief executive Bob Iger with a plan to reshape the entertainment group, reinstate its dividend and repair what he describes as a “broken” succession plan.

Peltz is set to take on Disney in the most high-profile proxy battle in years as he seeks shareholder support for a board seat. The co-founder of Trian Fund Management has been on a media blitz, comparing the company to communist China in a television interview with CNBC, setting the tone for a protracted and bitter fight.

Proxy battles are costly affairs with both sides spending millions of dollars to win shareholder support. They also tend to involve aggressive media campaigns and lots of mud slinging.

Peltz is no ingenu. This will be his fourth proxy battle since he founded Trian in 2005 with his son-in-law and chief investment officer Ed Garden and the company’s president, Peter May.

The 80-year-old investor, who has built a reputation for overhauling consumer goods businesses, can be a ruthless opponent, say people who know him.

“He always starts by crushing management and humiliating them publicly as he did today on CNBC. Then he usually gets what he wants — in this case, a seat at the table,” said a second person who has worked with Peltz. “Finally, he becomes friends with them.”

That was the case for Peltz’s first boardroom tussle against HJ Heinz in 2006. The activist sought five seats on the company’s board after it rejected his turnround plan, claiming its chief executive William Johnson had mismanaged the company.

Peltz eventually won two board seats, including one for himself, and said at the time that he and Johnson would “smoke the peace pipe” and learn to work together. He remained a director until 2013 when the business was bought by Berkshire Hathaway and 3G Capital for $28bn, a significant uplift for investors.

Former Heinz board members would later vouch for Peltz in other proxy fights, including his bitter campaign at Procter & Gamble.

The 2017 battle has become the stuff of legend on Wall Street. Peltz claims the US consumer goods group spent more than $100mn to keep him off the board in what he has called “the dumbest thing” he has ever been involved in. The activist emerged victorious and his tenure on P&G’s board has largely been viewed as a success, with the company’s share price increasing more than 50 per cent.

But it has helped crown Peltz as a consumer goods whizz, a label that is unhelpful for the Disney fight. “[He] is a genius when it comes to consumer companies, but whenever he ventures out his record isn’t as stellar,” a person close to the investor said.

The Brooklyn-born investor faced a setback at DuPont in 2015 when the company managed to fend off his boardroom challenge, winning support from three of its largest shareholders and retail investors. The chemical goods group had offered Trian a board seat, but said Peltz himself could not be the nominee, citing a lack of scientific expertise.

Peltz faces similar challenges at Disney, which has seized on his lack of experience in the media business. “It’s just about him and his ego,” said one person close to the company. “As usual with him, you know, there’s always some kernel of truth, and there’s always some level of bullshit.”

Some Disney shareholders also think Peltz is not the right person to join the board.

“In our view should someone with half a per cent position who has held the shares for three months, should they get a board seat?” said Dev Chakrabarti, chief investment officer for concentrated global growth at AllianceBernstein, a top-20 investor.

“His record in the consumer space is overall good,” Chakrabarti said, “but we don’t view him as a media operator.”

Peltz has rejected the idea that he is just a consumer goods guy, pointing to previous investments in Lionsgate, Time Warner and Comcast, though he was not a board director at any of these companies.

Peltz has at times come under pressure from his own investors over Trian’s performance, which has been mixed. The fund ended 2022 down 10 per cent, according to people who have seen the numbers, compared with a 19 per cent decline in the S&P 500.

Trian’s biggest failure has been at General Electric, which one investor described as a “disaster”.

Trian amassed a $2.5bn stake in the industrials group in October 2015 when its shares were trading at about $25. It predicted that GE’s stock price would almost double by the end of 2017 as it pushed for cost reductions and share buybacks. Three years later, however, Trian’s stake was worth about a quarter of its original value and dragged heavily on returns.

Should Peltz be successful in gaining a board seat at Disney, he would add to his current directorships at fast-food group Wendy’s, consumer goods maker Unilever and Madison Square Garden Sports, the holding company for the New York Knicks and Rangers sports teams, in which he has a personal stake.*

A longtime hockey fan and friend of MSG owner James Dolan, Peltz would have an unusual perch into both the media and team-level operations in the world of sport.

All told, Peltz is widely considered to be a fairly constructive activist investor, according to people who have found themselves on the other side of the negotiating table.

“We had some huge fights in the past but ultimately he’s focused on improving things and is reasonable behind closed doors,” said a person who had in the past advised a company targeted by Peltz. “He wants to be listened to and taken seriously, he’s not arrogant at all.”

Trian’s website is full of testimonials from former boardroom adversaries. Johnson, the former CEO of HJ Heinz, who fought against having Peltz on the board later said he had been impressed by the investor.

For his part, Peltz says he wants to roll up his sleeves and help Disney. “My background is not staring at a Bloomberg screen,” he told the Financial Times. “My background is running businesses.”

*This article has been amended to clarify that Peltz no longer has a board seat at Janus Henderson