Disney activist Nelson Peltz faces questions about Trian’s files

Earlier this week, Nelson Peltz attended his daughter Nicola Peltz Beckham’s birthday party in Los Angeles, a high-profile affair that starred the activist investor alongside former Disney actress Selena Gomez.

It wasn’t his only date with the Hollywood elite. On Tuesday, Peltz reached out to Disney executives, including CEO Bob Iger, with a plan to transform the entertainment conglomerate, reinstate its dividend, and fix what he describes as a “broken” succession plan.

Peltz will take on Disney in the most high-profile proxy fight in years as he seeks shareholder support for a board seat. The Trian Fund Management co-founder was in a media frenzy when he compared the company to communist China in a TV interview with CNBC, setting the tone for a protracted and bitter struggle.

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

Peltz is no genius. This will be his fourth proxy fight since Trian was founded 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 made a name for himself turning around consumer goods companies, can be a ruthless opponent, say people who know him.

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

That was the case in Peltz’s first boardroom scuffle against HJ Heinz in 2006. The activist was seeking five seats on the company’s board after it rejected its recovery plan, and claimed that its CEO, William Johnson, had mismanaged the company.

Peltz eventually won two board seats, including one for himself, saying 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 company was bought by Berkshire Hathaway and 3G Capital for $28 billion, a significant boost for investors.

Former Heinz board members later vouched for Peltz in other proxy battles, 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 giant spent more than $100 million to keep him off the board, which he described as the “stupidest thing” he’s ever been involved in. The activist emerged victorious, and his tenure on P&G’s board of directors was widely viewed as a success, with the company’s stock price rising more than 50 percent.

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

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The Brooklyn-born investor experienced a setback at DuPont in 2015, when the company managed to fend off its boardroom challenge and garnered the support of three of its largest shareholders and retail investors. The chemical company had offered Trian a seat on the board, but Peltz himself could not be nominated due to a lack of scientific expertise.

Peltz faces similar challenges at Disney, which has capitalized on his lack of experience in the media business. “It’s all about him and his ego,” said a person close to the company. “As always with him, you know, there’s always a grain of truth and always a certain amount of bullshit.”

Some Disney shareholders also don’t think Peltz is the right person to join the board.

“In our view, should someone with a half-percent stake who’s held the stock for three months 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 good overall,” Chakrabarti said, “but we don’t see him as a media operator.”

Peltz has dismissed the idea that he’s just a consumer goods guy, pointing to previous investments in Lionsgate, Time Warner, and Comcast, though he wasn’t a board member at any of those companies.

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

Trian’s biggest failure was at General Electric, in what one investor described as a “disaster.”

Trian acquired a $2.5 billion stake in the industrial conglomerate in October 2015 when its shares were trading at around $25. It forecast that GE’s stock price would nearly double by the end of 2017 as it pushed for cost-cutting and share buybacks. Three years later, however, Trian’s stake was worth about a quarter of its original value and was a drag on returns.

If Peltz lands a board seat at Disney, he would add to his current board positions at fast-food giant Wendy’s, consumer goods company Unilever, and Madison Square Garden Sports, the holding company for the New York Knicks and Rangers sports teams has a personal stake.*

A longtime hockey fan and friend of MSG owner James Dolan, Peltz has held an unusual position in both the media and team-level operations of the sports world.

All in all, Peltz is widely viewed as a fairly constructive activist investor, say people who have found themselves on the other side of the negotiating table.

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

Trian’s website is full of testimonials from former opponents of the board. Johnson, the former CEO of HJ Heinz, who objected to having Peltz on the board, later said he was impressed with the investor.

For his part, Peltz says he wants to roll up his sleeves and help Disney. “My background isn’t staring at a Bloomberg screen,” he told the Financial Times. “My background is in business leadership.”

*This article has been amended to clarify that Peltz no longer serves on the board of directors of Janus Henderson