Disney to restructure, avoid takeover fight​

By Jake Rickman
Image credit - nikkimeel / Shutterstock.com​

What do you need to know this week?

We have reported over the past several weeks on the financial performance issues plaguing Walt Disney and activist investor Trian Partners’ resultant bid to secure a seat on the media group’s board of directors as part of its proxy battle. Last week, Disney announced that it would undertake a substantial corporate reorganisation to cut costs and boost profitability. Shortly thereafter, Trian announced that it will discontinue the proxy battle against Disney’s management, evidently satisfied with the terms of the reorganisation.

Bob Iger, who led Disney for fifteen years before coming back for a second stint, described the reorganisation plan as the third significant transformation Disney will have undertaken under his leadership. The first transformation was the series of production studio acquisitions that included Pixar and Marvel. The second was the launch of Disney’s streaming platform in a bid to corner a portion of the streaming market.

The main thrust of the third transformation, as set out in a press release and the group’s Q1 2023 earnings report, is to restore operational and financial independence to Disney’s three core business units:
  • Disney Entertainment, which includes its portfolio of media and content;
  • ESPN and affiliated international sports channels; and
  • Disney Parks, Experiences and Products, which houses Disney theme parks, cruise lines, and various other products like its games and publishing business.
Under the previous leadership of Bob Chapek, who was appointed CEO following Iger’s initial departure, investors had criticised Disney’s management for consolidating the financial and operational status of its business divisions at the board level, which it was argued affected the group’s creative output.

Referenced briefly are a host of cost-cutting measures in total projected to save $5.5bn. As reported by Reuters, much of this will be funded by slashing 7,000 jobs — or 3% of its total workforce.

Finally, Disney aims to reinstate its dividend by the end of the year, which it suspended beginning in July 2020 and was a primary source of Trian’s criticism of the existing management strategy.

Why is this important for your interviews?

As discussed a few weeks ago, if you are interested in activist investing and public markets, this is a fascinating development in the proxy conflict between Trian and Disney’s management.

If nothing else, it demonstrates the extent to which an activist shareholder bid can influence management’s decision despite owning a mere 0.5% of the group’s share capital. The mere threat of an activist proxy campaign was sufficient to compel Disney’s management to course correct.