Nelson Peltz loses proxy battle

Disney Preliminary results showed that shareholders on Wednesday re-elected the media conglomerate's full board of directors, handing a tough defeat to activist Nelson Peltz and former Marvel CEO Ike Perlmutter, both of whom called for change at one of America's most iconic companies.

The widely expected victory culminates a months-long combative process and confirms the board's decisions, from the move to bring back Chief Executive Bob Iger to its efforts to revitalize the $223 billion media company. Peltz-led Trian Partners wanted to fire two directors, Maria Elena Lagomasino and Michael Vroman, citing persistent poor stock performance, a botched succession process, and misdirected billions in investments.

A person familiar with the matter said Peltz lost to Lagomasino by a margin of 2 to 1. That person added that retail voters overwhelmingly supported Disney, which helped Iger get 94% of the total vote. Former Disney CFO Jay Rasulo, who was also nominated by Trian, lost to Lagomasino by a larger margin of 5-1. The person called it Peltz's biggest loss ever.

In percentage terms, the director's vote turnout was in the mid-60s, another person familiar with the matter said. In 2023, about 63% of Disney shareholders voted.

The second activist, Blackwells, also failed to win board seats in his long-shot bid.

“I would like to thank our shareholders for their confidence in our Board and management. With the distracting proxy competition now over, we are eager to focus 100% of our attention on our most important priorities: growth and value creation for our company. Shareholders and the creative excellence of our clients,” Iger said in a statement.

Disney has deployed significant resources into the proxy battle. The company has asked for support from its founding family, Star Wars creator George Lucas, JP Morgan CEO Jamie Dimon, Laurene Powell Jobs, the widow of Pixar and Apple CEO Steve Jobs.

While Peltz will not end up on Disney's board, he and his company have claimed some credit for the company's stock rebound.

“Although we are disappointed with the outcome of this proxy competition, Trian greatly appreciates all the support and dialogue we have had with Disney stakeholders. We are proud of the impact we have made in refocusing this company on value creation and good governance.” Trian said in a statement.

The company also spent an estimated $40 million fighting Peltz. The press worked at full capacity. Disney's largest shareholders, Vanguard and BlackRock, decided to support management in the final days before Wednesday's meeting.

Ultimately, the activists failed to convince enough individual or institutional contributors that he had a meaningful plan to fix the House of Mouse. While Peltz's nomination received significant support from proxy advisors and smaller institutional investors, shareholders were less demanding than Rasulo.

Although her picks did not win seats on the board, Blackwells welcomed the fact that Peltz was not elected.

“The Blackwells' primary goal of keeping Nelson Peltz out of the Disney boardroom has been achieved,” Blackwells said in a statement. “The company would have benefited from any one of our nominees for the hard work required over the next few years to advance this remarkable company, but we respect the will of shareholders and the outcome.”

Peltz, who doesn't like to be called an activist but has coordinated successful campaigns at such well-known companies as PepsiCo, P&G and Wendy's, controls a $3.98 billion stake in Disney, or about 2% of total shares outstanding. Most of these shares are owned by Perlmutter.

With Disney shares up nearly 50% since Peltz's campaign first began, Trian and Perlmutter have achieved a lot despite their defeat in the boardroom. Peltz is on the hook in part for the estimated $25 million spent on the fight, a small sum compared to the paper winnings in the stake he controls.

While the battle with Peltz is behind us, Disney still faces unprecedented challenges. ESPN has been shedding subscribers for years, raising questions about whether it is ready to compete with upstarts. Disney's streaming business has spent billions to gain subscribers and is losing money as it tries to catch up to market leader Netflix.

Perhaps most importantly, the company is searching for a successor to Iger for the second time in five years. Disney's failed succession, in which Iger's hand-picked replacement, Bob Chapek, was ousted after only two years in office, was a major point Trian used against the company.

“Thank you for your confidence in Disney’s project management, and the ambitious strategy we are implementing across our business to build for the future,” Iger said after the initial vote was announced. “Now that this distracting agency competition is over, we are here to focus 100% of our attention on our top priorities, growth and value creation for our shareholders and creative excellence for our clients. Thank you again for your support and for your continued investment in this.”

There is evidence that senior advisers to the agents agreed with Peltz's argument that the board was ill-equipped to undertake a second search.

Shareholder advisory firms Glass Lewis and ISS cited succession issues in their recommendations to investors. Glass-Lewis sided with Disney and asserted that Iger's return, coupled with this year's nominations of Morgan Stanley CEO James Gorman and former Sky CEO Jeremy Darroch to the board, had given the company “sufficient opportunity to launch a more credible succession, development and outreach program.” and implementing several key initiatives that appear to reasonably target recognized operational and financial weaknesses at Disney.”

Investors rallied around Disney in February after the company made a series of major announcements during its earnings call, including acquiring exclusive streaming rights to Taylor Swift's Eras Tour concert film, a $1.5 billion strategic investment in Epic Games as well as a groundbreaking game. ESPN streaming service.

Peltz described the series of ads as a “spaghetti against the wall” plan aimed at “distracting shareholders.”

Disney shares have jumped 23% since Disney's fiscal first-quarter earnings report in early February.

Disclosure: Sky News is owned by Comcast, the parent company of CNBC.