Disney Braces for a Fight Over Its Board

How Nelson Peltz picked his fight with Disney

Disney already faces enormous challenges, including ballooning costs at its streaming service and unclear C.E.O. succession plans. Now it faces a proxy fight from Nelson Peltz’s Trian, the activist investment firm known for taking on blue-chip companies like Procter & Gamble.

But while their fight became public on Wednesday — after Disney rejected Mr. Peltz’s bid for a board seat — tensions between the two sides have been growing for months. A Disney regulatory filing released this morning reveals how the House of Mouse came to clash with one of Wall Street’s top activist investors.

• Last July, Peltz met with Disney’s then-C.E.O., Bob Chapek, at Disneyland Paris. At the time, Trian hadn’t yet invested in the company, but Mr. Chapek was under pressure: He had gotten Disney entangled in a political fight in Florida; its Disney+ streaming service was losing money; and he had alienated important Hollywood partners. Still, Disney had just renewed Mr. Chapek’s contract for three more years. Soon after, Mr. Peltz met with two Disney directors about potentially joining the board.

• In August, another activist, Dan Loeb’s Third Point, disclosed a stake in Disney and proposed spinning off ESPN, buying Comcast’s stake in the streaming platform Hulu and adding more board members. Mr. Loeb reached a truce with Disney a month later, with the company naming the former Meta executive Carolyn Everson as a director.

• In early November, Disney delivered a disastrous quarterly earnings report. Within days, Mr. Peltz called Mr. Chapek to start formal discussions between the two companies; they met on Nov 12. On Nov. 20, Disney fired Mr. Chapek and brought back his predecessor, Bob Iger. By then, Trian had about $800 million worth of Disney shares. Executives from Trian and Disney met for 30 minutes later that month, and Mr. Peltz made his pitch to join the board.

• In early December, Mr. Peltz informed Disney of his intention to nominate himself for its board and pushed for a meeting. By the end of the month, the board finally agreed to a meeting with Mr. Peltz, but Mr. Iger told him it would have to wait until after he returned from yachting off the coast of New Zealand.

• Earlier this week, Disney and Trian met for 45 minutes. Mr. Peltz noted that the company’s shares were at a near-eight-year low, and urged Disney to revamp its streaming business, refocus on growing profits, reinstate its dividend and identify a successor to Mr. Iger. Afterward, the company offered to make Mr. Peltz a “board observer” — but not a full director — and asked him to stop fighting publicly; the activist declined. Within days, Disney announced Mr. Peltz’s intentions, and Trian went public with its campaign.

Disney is hoping it can ward off Mr. Peltz. The newly revealed background of Trian’s challenge suggests that Disney has been shaking itself up — including by firing Mr. Chapek and reinstalling Mr. Iger — perhaps in part to deny Mr. Peltz grounds to describe himself as an agent of change. Mr. Iger remains popular among many investors and analysts for leading Disney to record financial results during his previous 15-year run as C.E.O.

It’s unclear whether that will be enough to convince investors. Though Mr. Peltz isn’t pushing for Mr. Iger to step down, he has repeatedly criticized the Disney chief for overpaying in his $71.3 billion takeover of 21st Century Fox. And Trian can point to its successful shake-ups of companies like P.&G. and General Electric, though revamping an entertainment giant is a new challenge.

In any case, investors should bring some popcorn and watch the fireworks.

HERE’S WHAT’S HAPPENING

Flight delays persist as the F.A.A. recovers from a system outage. Hundreds of flights within, into and out of the United States were delayed or canceled this morning, after a pilot notification service went down on Wednesday. The problems underscore the F.A.A.’s challenge to modernize systems that critics say need to be updated urgently.

Subway weighs a sale. The privately held sandwich chain has hired advisers and hopes to fetch more than $10 billion, The Wall Street Journal reports. Subway had an estimated $9.4 billion in sales in 2021, but revenue has declined in recent years amid growing competition.

FTX says it has found more than $5 billion in liquid assets. The discovery of billions in cash and easily sellable cryptocurrency will be welcomed by customers and creditors, but another major hurdle remains: The amount of its customer shortfall still isn’t known.

Amazon loses its bid to overturn unionization at a Staten Island warehouse. A federal labor official rejected the e-commerce giant’s claim that a union vote at its JFK8 site last April was marred by improprieties. Amazon plans to appeal.

Twitter weighs new avenues to raise money. Elon Musk’s social network has considered selling off at least some dormant user names, The Times reports. But it isn’t clear how much that would raise for the company, which is suffering from a sharp drop in advertising revenue as brands remain wary of spending on the platform.

What to watch for in today’s C.P.I. data

Economists are forecasting that the latest Consumer Price Index report for the United States, due out at 8:30 a.m. Eastern, will show a decline in inflation for a third straight month. Investors are now speculating that the data could make the Fed pivot on interest rates, and that the central bank may yet pull off its “soft landing” objective of lower prices without a recession. You can follow the Times’s coverage here.

A growing number of Wall Street analysts are feeling bullish about on Thursday’s reading. The consensus forecast on C.P.I. is that prices rose 6.5 percent on an annualized basis last month. That’s still well above the Fed’s target, but would represent a substantial improvement from June, when the so-called headline C.P.I. figure hit 9.1 percent, a 40-year high.

Assuming that the worst of inflation is over, investors have started moving back into both risky and stable assets: The Nasdaq has gained 7 percent in the past two weeks, while the yield on 10-year Treasury notes has fallen by more than 35 basis points in the same period.

Falling energy prices — gasoline prices fell 10 percent last month, according to RBC Capital Markets — and slumping car sales will likely have played roles in depressing the headline number, economists say. But the big question is whether wage gains in recent months have fueled so-called “service inflation,” or rising prices for things like travel, restaurants and entertainment.

“While we expect this deflation to continue as we head into 2023, the factors driving inflation have now switched to services inflation,” said Andrew Patterson, senior economist at Vanguard, in a note on Wednesday, adding that factor could keep core inflation above the Fed’s 2 percent target for much of the year.

Markets are still betting on smaller interest rate increases, and some Fed officials seem to be on the same page. Susan Collins, the president of the Boston Fed, told The Times’s Jeanna Smialek that she’s leaning toward a quarter-point rate increase at the central bank’s next rates-setting meeting — but only if data shows inflation is under control.

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Corporate America’s get-to-work message for Washington

The traditionally tight bond between the U.S. Chamber of Commerce and Republicans has frayed in recent years. It weakened further after Representative Kevin McCarthy, Republican of California, reportedly suggested that the business lobbying group replace Suzanne Clark as C.E.O., as he sought conservative support for his pursuit of the House speakership.

Ms. Clark remains in place, however, and hasn’t backed off from challenging lawmakers. DealBook has gotten a preview of her annual State of American Business address, scheduled to be delivered at 11 a.m. Eastern; in it, she plans to call out both political parties.

“When it comes to Washington, the state of American business is fed up,” Ms. Clark plans to say. “Businesses don’t have the clarity or the certainty to plan past the next political cycle. It means our country won’t be able to advance an agenda that extends beyond two to four years, or pass the policies needed to position us for our future.”

But Ms. Clark won’t just chide lawmakers. She will also introduce an “agenda for American strength,” essentially a policy wish list. It includes:

• Continuing a bipartisan approach that led to Congress approving $1 trillion in infrastructure spending. The Chamber hopes Republicans and Democrats can team up to overhaul permitting of energy infrastructure projects and approve offshore leasing for oil and gas projects.

• Expanding access to employment-based visas, and fixing “the broken immigration system by securing the border” and protecting the undocumented immigrants known as Dreamers.

• Continuing to be tough on China’s human rights abuses and unfair trade practices — but also recognizing the country’s “value as a commercial partner.”

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“We must hold social-media companies accountable for the experiment they are running on our children for profit.”

— President Biden, in a Wall Street Journal opinion essay, urging Congress to pass bipartisan legislation that would protect consumer privacy and limit ad targeting by Big Tech firms.

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The latest on layoffs

More companies announced job cuts on Wednesday as corporate America moves to shrink its work force in the face of challenging economic conditions. Here’s an update:

• Goldman Sachs laid off more employees on Wednesday as part of a cost-cutting drive that involves reducing head count by 3,200. (Some workers were reportedly given as little as 30 minutes to pack up their desks, according to The Financial Times.) More are expected to leave after receiving bonuses that will be sharply lower than last year’s.

• BlackRock will cut up to 500 jobs, in the asset-management giant’s first set of layoffs since 2019. The firm’s belief that an economic downturn is coming may be driving the move: “A recession is a matter of when, not if,” Gary Shedlin, BlackRock’s C.F.O., told analysts last month.

• Verily, a health care division of Alphabet, plans to cut 200 jobs, or 15 percent of its work force. It’s the first in what is expected to be a round of layoffs at Google’s parent company.

• Flexport, a start-up that produces supply-chain software, will lay off 640 workers, or 20 percent of its staff. Executives said a slowdown in shipping, tied to lower consumer demand, required cost-cutting measures.

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THE SPEED READ

Deals

• Microsoft considered bidding for Figma, the design software maker, before it was sold to Adobe for $20 billion. (CNBC)

• JPMorgan said it was duped by fake user data in its $175 million acquisition of a financial planning site focused on college-age consumers. (Forbes)

• T-Mobile US is reportedly weighing a deal to buy Mint Mobile, a budget wireless network backed by the actor Ryan Reynolds. (Bloomberg)

Policy

• The U.S. may finally breach the debt ceiling. (NYT)

• Apple will reportedly reveal more about why apps get pulled from its app store following pressure by activist investors. (FT)

• President Biden’s aides found another batch of classified documents, the second such discovery this week. (NYT)

• China is close to naming a vice foreign minister and U.S. specialist as its next ambassador to Washington. (WSJ)

Best of the rest

• News Corp’s Dow Jones, the publisher of The Wall Street Journal, is laying off employees. (Reuters)

• For Kanye West, the risk of losing lawsuits by default is growing as the rapper doesn’t appear to have legal representation. (Insider)

• Rebecca Blumenstein, a deputy managing editor at The Times, has been named president of editorial at NBC News. (NYT)

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