Equities

Proxy Battle Loss Doesn't Deter Trian Partners' $300 Million Disney Gain

NEGATIVE

Nelson Peltz's Trian Partners nets $300 million from Disney investment despite losing proxy battle for board influence.

By Alex P. Chase

4/4, 06:03 EDT
Walt Disney Company
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Key Takeaway

  • Nelson Peltz's Trian Partners gained $300 million from Disney investment despite losing a proxy battle for board seats.
  • Trian's 40% return on Disney mirrors the S&P 500's performance, highlighting challenges in outperforming the market.
  • The firm sold a third of its stake for $60 million profit and benefited from an arrangement with Ike Perlmutter, adding complexity to its strategy.

Proxy Battle Loss

In a recent turn of events, Nelson Peltz and his firm Trian Partners faced a setback in their quest for influence within Disney, failing to secure board seats in a high-profile proxy battle. Despite this defeat, Trian Partners has reportedly realized a profit of approximately $300 million on its 16-month investment in Disney, a gain that, while substantial, raises questions about the firm's influence and long-term strategy.

Financial Gains Amidst Defeat

Trian's investment journey with Disney began in 2022 with an $800 million stake, purchasing shares at around $88 each. This strategic move positioned the firm near the stock's recent low, which closed at $118.98 on Wednesday. Although Trian initially launched a proxy fight and then retreated, selling about a third of its stake for a $60 million profit, the firm's recent failure to win board seats contrasts sharply with its financial gains.

The arrangement with Ike Perlmutter, former Marvel Entertainment chairman and a significant Disney shareholder, further complicates the narrative. Entrusting Trian with the voting rights of his Disney shares, Perlmutter's deal included a 10% cut of the gain on his shares for Trian, a detail not previously reported. This arrangement contributed approximately $85 million to Trian's profit, despite the firm's expected $25 million expenditure on the campaign.

Market Performance and Strategy

Trian's roughly 40% return on its Disney investment mirrors the S&P 500's performance over the same period, suggesting that while profitable, the investment was not exceptionally so, especially considering Trian's substantial assets under management, totaling around $10 billion. This context underscores the challenges Trian faces in enhancing its portfolio's performance, particularly after years of underperformance in its main fund.

The firm's ambition to secure two seats on Disney's board was driven by a belief in the need for the company to accelerate its reinvention and identify a successor to CEO Bob Iger. Peltz's remarks at Disney's annual meeting, emphasizing the stock's positive performance following Trian's initiatives and the firm's intention to continue monitoring progress, reflect a cautious optimism. However, his hope that "this time will be our last and that shareholders will not be let down like a year ago" hints at underlying concerns about Disney's direction and governance.