© Reuters. FILE PHOTO: The signage at the main gate of The Walt Disney Co. is pictured in Burbank, California, May 7, 2012. Picture taken May 7, 2012. REUTERS/Fred Prouser/File Photo
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By Svea Herbst-Bayliss and Dawn Chmielewski
(Reuters) -Activist investor Nelson Peltz on Thursday ended his quest for a board seat at Walt Disney (NYSE:) Co after Chief Executive Bob Iger laid out plans to fix the home of Mickey Mouse, cheering investors.
“The proxy fight is over. This is a win for all shareholders,” a spokesperson for Peltz’s Trian Fund Management said.
The decision came only hours after Disney reported earnings that topped Wall Street expectations and Iger outlined a corporate restructuring that addresses many of Peltz’s criticisms.
After weeks of trading increasingly personal barbs, Peltz extended an olive branch to Disney saying he congratulated the company and its CEO on new “operating initiatives” that dovetail with his thinking.
Disney issued a statement applauding Peltz’s decision to end a board challenge which it called a “distraction. “We have tremendous faith in Bob Iger’s leadership and the transformative vision for Disney’s future he set forth yesterday,” the board said.
Disney shares were up 1.9% at $113.94 on Thursday afternoon. The stock has risen nearly 30% since the start of the year.
Trian owns a stake of nearly $1 billion in Disney and had criticized the company for bungled succession planning, overpaying for new assets and runaway costs.
Disney provided more details on Thursday about its restructuring, which returns control over business units to the company’s creative executives.
Disney Entertainment co-Chairmen Alan Bergman and Dana Walden will be responsible for global entertainment content, including streaming. Bergman will oversee film, animation, live action, the theatrical group and music, and Walden will be responsible for television and Hulu originals.
Jimmy Pitaro will lead ESPN, a sports group that includes the ESPN networks and ESPN+ streaming service. Josh D’Amaro will retain oversight of parks, experiences and products.
As part of the restructuring, Rebecca Campbell, head of International Content and Operations, is leaving the company. Iger wrote a memo acknowledging her 25 years of service and her “innumerable contributions” to the company.
Bergman, Walden and Pitaro sent a memo to staff, acknowledging the reorganization would result in reductions to our overall workforce, “which will affect every segment and function across the company.”
Disney said on Wednesday that 7,000 jobs would be eliminated.
‘FIRST PHASE’ IN DISNEY’S TRANSFORMATION
For Peltz’s Trian Fund Management the board challenge appears to have paid off with an estimated 20% gain on his investment. Based on public filings, Peltz paid an average $94.09 per share for his initial investment.
As recently as last week Peltz was trying to rally shareholders to vote him onto Disney’s board, arguing that he had the experience, after sitting on 11 boards, to help turn the company around. Disney disagreed and said he did not have the skills needed to aid the media conglomerate.
The proxy contest was quickly shaping up as one of the year’s biggest and most contentious, pitting a billionaire investor against a chief executive who was widely admired in Hollywood.
Iger, who came out of retirement in November to return to Disney, on Wednesday dazzled Wall Street on his first earnings call since replacing Bob Chapek, who was fired last year after the company in November reported a 66% drop in quarterly profit.
Iger addressed points Peltz had raised in his proxy battle and said Disney reorganizing into three divisions: an entertainment unit encompassing film, television and streaming, a sports-focused ESPN unit and one with parks, experiences and products.
Analysts said Peltz made a reasonable request for one board seat and to join the 12-member board himself. But after the most recent earnings and reorganization, they handicapped his chances as poor for winning an expensive and time-consuming contest.
Additionally, billionaire hedge fund manager Daniel Loeb’s Third Point LLC had recently pushed Disney to make changes and quickly settled with the company to add a new director, suggesting that the company already has views from a top shareholder.
People familiar with Peltz’s thinking said he felt he did not need to waste his time or money on fighting a battle whose odds of winning had just declined. Peltz appeared on CNBC on Thursday to announce his proxy fight with Disney was over.
Peltz’s reversal will give Iger and management some room to breathe. “Iger has a lot on his plate,” said LightShed Partners media analyst Rich Greenfield. “And an activist just takes time away from figuring out Disney’s future.”
Early reaction from Wall Street analysts about Disney’s moves was positive.
“While we are encouraged by Bob Iger’s strategic vision for Disney, this is clearly the first phase in Disney’s transformation, which will require adept execution,” wrote Bank of America (NYSE:) media analyst Jessica Reif Ehrlich in an investor note. “Bob Iger has a long, strong track record which provides confidence he will manage this transition for Disney.”