Disney’s $7.5 billion cost cuts and conflicts with activist investors

Summary

  • Disney CEO Bob Iger recently announced a significant transformation at Disney, which includes management changes, operational streamlining, and a focus to make its streaming operations profitable.
  • This strategic shift aims to achieve around $7.5 billion in cost reductions, with a key focus on revamping ESPN as a top online platform, enhancing the performance and economics of the studios, and accelerating the growth of theme parks.
  • Disney has rejected two nominees for its board put forth by activist shareholders Trian and Blackwells.
  • Disney is actively searching for qualified candidates with relevant experience to its operations for its board, resulting in the additions of James Gorman, former CEO of Morgan Stanley, and Jeremy Darroch, a seasoned media executive and former CEO of Sky.

Disney’s Transformational Journey

Bob Iger, Chief Executive of Disney, has disclosed to investors that the company is undergoing a major transformation. The aim of this revamp is to streamline operations, implement management changes for boosted efficiency, and cut costs. Disney hopes to achieve approximately $7.5 billion in cost savings, $2 billion more than initially estimated.

Disney’s primary goal is to make its streaming platform profitable. This extends to enhancing ESPN as a leading digital platform, bettering film outputs and their economics, and supercharging its theme parks’ growth.

Disney has already made significant progress on these initiatives according to Iger, who calls for shareholders’ backing of Disney’s 12 nominees and the rejection of those presented by investor collectives Trian and Blackwells.

Board Nominee Disputes

In December, Trian Fund Management put forth its CEO, Nelson Peltz, and Disney’s former CFO, Jay Rasulo, as independent director candidates for Disney’s board. Similarly, Blackwells Capital nominated three individuals as potential replacements on Disney’s board. Despite these nominations, the existing Directors at Disney remained unfazed, rejecting both Trian’s and Blackwells’ candidates earlier this month. The lack of strategic ideas and pertinent experience were the reasons for the nominee rejection.

In response to Peltz’s continued attempts to secure a board seat in addition to the complications with Perlmutter, the directors sought new candidates with relevant industry experience. As a result, they added James Gorman and Jeremy Darroch to the board. However, the board’s decision caused Trian to announce the nomination of Peltz and Rasulo once again.

Reacting to Critics

Disney defended its decision by highlighting Rasulo’s stagnant perspective and unsuccessful directorial run at iHeartMedia. Peltz faced criticism for Disney’s declining stock performance, various failures at the theaters, and issues with the streaming business. The activist investor believes that the close association of the board with long-tenured CEO Bob Iger is responsible for these shortcomings and sees the need for new leadership and fresh perspectives.

The impact of these internal power struggles at Disney is likely to impact forex or trading indirectly. Stock prices might see turbulence as investors react to ongoing changes in the board and the company’s strategic direction. This could potentially influence the trading of Disney’s stocks and assets in the financial market.

PIP Penguin
Logo