Walt Disney Company (the) · NYSE:DIS
Walt Disney Company (the) — Proxy Contest (January 2023)
35 slides from Walt Disney Company (the)'s proxy contest presentation, Jan 12, 2023
Slide 1: Restore the Magic
Confidential – Not for Reproduction or Distribution Restore the Magic January 12, 2023 This presentation is not in any way affiliated with, sponsored by, or endorsed by The Walt Disney Company or any other companies referred to herein. © 2023 Trian Fund Management, L.P. All rights reserved.
Slide 2: Disclosure Statement and Disclaimers
Disclosure Statement and Disclaimers CONFIDENTIALITY This presentation is being furnished to you on a confidential basis to provide preliminary summary information regarding The Walt Disney Company (the “Issuer”) and one or more funds managed or to be managed by Trian Fund Management, L.P. (“Trian”
Slide 3: Disclosure Statement and Disclaimers (continued)
Disclosure Statement and Disclaimers (continued) FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements. All statements contained in this presentation that are not clearly historical in nature or that necessarily depend on future events are forward-looking, and the words “a
Slide 4: Why is Trian Here Today?
Confidential – Not for Reproduction or Distribution Why is Trian Here Today? Disney is the most advantaged consumer entertainment company in the world. It has unrivaled global scale, irreplaceable brands, inimitable Parks and can leverage the Disney "flywheel" to monetize its intellectual property
Slide 5: Disney is Trading at an 8-Year Low
Confidential – Not for Reproduction or Distribution Disney is Trading at an 8-Year Low Disney’s 10-Year Share Price Performance $200 $180 $160 $140 $120 $100 $95.56 $80 Despite Disney’s share price peaking in 2021, it currently trades near its 8-Year low $60 $40 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Ja
Slide 6: Trian Overview
Confidential – Not for Reproduction or Distribution Trian Overview Investment management firm founded in November 2005 Focused on buying large positions in high-quality companies where we see significant long-term potential and working collaboratively with management and boards to optimize strat
Slide 7: What Differentiates Trian: A Highly Engaged Shareowner
Confidential – Not for Reproduction or Distribution What Differentiates Trian: A Highly Engaged Shareowner Investors with an ownership mentality, with a goal to build better businesses for the long term Unique capital base: Unlike typical hedge funds with 90-day liquidity, 85% of Trian’s capital
Slide 8: Long Track Record of Value Creation With Nelson On the Board
Confidential – Not for Reproduction or Distribution Long Track Record of Value Creation With Nelson On the Board Trian has worked closely with numerous companies across industries, and has demonstrated a track record of long-term value creation with multiple turnarounds Trian Investments Where Nel
Slide 9: The Procter & Gamble Company ("P&G") Case Study
Confidential – Not for Reproduction or Distribution The Procter & Gamble Company (“P&G”) Case Study P&G is a +185-year-old global consumer products company with a portfolio of iconic brands and leading scale and market share across categories However, P&G had underperformed over an extended peri
Slide 10: Case Study: Procter & Gamble Overhauled its Matrix Structure
Confidential – Not for Reproduction or Distribution Case Study: Procter & Gamble Overhauled its Matrix Structure Prior to Trian’s involvement, P&G had underperformed over an extended period of time. Trian believed that P&G’s matrixed organizational structure was preventing the company from realizi
Slide 11: Case Study: Simplification Dramatically Improved Performance
Confidential – Not for Reproduction or Distribution Case Study: Simplification Dramatically Improved Performance Results Significant improvement in financial performance Increased organizational accountability and agility Market share losses to market share gains Improved product superiority
Slide 12: Trian Has Developed Strong Relationships Following Prior Proxy Contests
Confidential – Not for Reproduction or Distribution Trian Has Developed Strong Relationships with Company Boards and Management Teams Following Prior Proxy Contests Trian has been involved in three proxy contests(1): – (i) Heinz in 2006; (ii) DuPont in 2015; and (iii) P&G in 2017 In all three, w
Slide 13: Disney's Total Shareholder Return Consistently Underperforms
Confidential – Not for Reproduction or Distribution Disney’s Total Shareholder Return (“TSR”) Consistently Underperforms 10-Year 5-Year Δ: (371%) Δ: (66%) 478% Δ: (116%) 56% Δ: (37%) 223% 26% 107% S&P 500 Company Proxy Company Proxy S&P 500 (10%) Peers Peers 3-Year 1-Year 26% Company Proxy S&P 500 P
Slide 14: Disney's Financial Performance Has Been Disappointing
Confidential – Not for Reproduction or Distribution Disney’s Financial Performance Has Been Disappointing Change in Financial Performance Since 2018 YoY Change $mm, except per share data FY2018 FY2022 FY18-22 Underlying Change in Performance $24bn revenue increase driven by the 21st Century Fox de
Slide 15: FY 2023 Guidance Raises Serious Questions
Confidential – Not for Reproduction or Distribution FY 2023 Guidance Raises Serious Questions Can management forecast appropriately? Does Disney have the ability to effectively manage its business? Why didn’t Disney’s CFO issue a warning beforehand? Revenue Guidance ($mm) Operating Income Guid
Slide 16: Disney Has Underperformed Under this Board's Watch
Confidential – Not for Reproduction or Distribution Disney Has Underperformed Under this Board’s Watch While Bob Iger just “re-joined” the Board, he has essentially served on the Board since 2000 with only a short respite from January - October 2022 (~10 months) There are still several current d
Slide 17: A Strong Case for Change at Disney
Confidential – Not for Reproduction or Distribution A Strong Case for Change at Disney 1 Capital Allocation – Since 2018, EPS has been cut in half despite $162bn spent on M&A, capex and content – approximately equal to Disney’s entire current market cap – Management has shown poor judgment on recen
Slide 18: Disney's M&A and Growth Investments Have Been Earnings Dilutive
Confidential – Not for Reproduction or Distribution Disney’s M&A and Growth Investments Have Been Earnings Dilutive While Disney’s growth investments and M&A have contributed to total revenue growth of 41% between FY 2018-22, EPS has declined 50% over the same period Incremental Invested Capital (
Slide 19: Disney Materially Overpaid For The Fox Assets
Confidential – Not for Reproduction or Distribution Disney Materially Overpaid For The Fox Assets Disney appears to have paid 26.5x 2018A EBITDA for Fox’s traditional media assets (excl. Hulu) whereas comparable media transactions were completed at 11.9x LTM EBITDA(1) The Fox deal created a mass
Slide 20: Fox Acquisition Has Not Delivered Promised Financial Benefits
Confidential – Not for Reproduction or Distribution Fox Acquisition Has Not Delivered Promised Financial Benefits Disney’s 2022 operating profit, excluding Parks, Experiences and Products (“ex-DPEP”) of $3.1bn is 74% below the pro forma operating profit of $11.8bn at the time of the acquisition in
Slide 21: Fox Acquisition Increased Disney's Leverage Dramatically
Confidential – Not for Reproduction or Distribution Fox Acquisition Increased Disney’s Leverage Dramatically Investors are still paying for the Fox deal as Disney works to reduce its leverage Disney is also expected to buy Comcast’s $9bn(1) stake in Hulu in 2024, which will keep its leverage pro
Slide 22: An Acquisition of Sky by Disney Would Have Permanently Impaired Shareholder Value
Confidential – Not for Reproduction or Distribution An Acquisition of Sky by Disney Would Have Permanently Impaired Shareholder Value… Disney’s final bid in September 2018 valued Sky at £34bn; some analysts today estimate it is currently worth ~£9bn(1), 73% below Disney’s final offer – This bid re
Slide 23: ...and Would Have Put Even More Stress on Disney's Balance Sheet
Confidential – Not for Reproduction or Distribution …and Would Have Put Even More Stress on Disney’s Balance Sheet Had Disney purchased Sky on top of the Fox deal, Disney would have paid ~$100bn at a combined transaction multiple of ~20x EV/EBITDA Pro forma, it would have added ~$67bn of net deb
Slide 24: Earnings and FCF are Not Expected to Recover to 2018 Levels for Another 3+ Years
Confidential – Not for Reproduction or Distribution Earnings and FCF are Not Expected to Recover to 2018 Levels for Another 3+ Years Disney’s Adj. Diluted EPS – Consensus (FY) Disney’s Free Cash Flow – Consensus (FY) Despite benefiting from significant price Disney’s free cash flow profile has deter
Slide 25: Disney Had a History of Increasing its Dividend
Confidential – Not for Reproduction or Distribution Disney Had a History of Increasing its Dividend In 2020, Disney eliminated its dividend as it faced cash flow challenges caused by the COVID-19 pandemic, significant streaming investments and its over-levered balance sheet Prior to 2020, Disney
Slide 26: Disney's Shareholder Engagement Process Is Indicative of Poor Governance
Confidential – Not for Reproduction or Distribution Disney’s Shareholder Engagement Process, or Lack Thereof, is Indicative of Poor Governance Why did Bob Iger and the Board invite Nelson to meet in person three years ago to hear his views on Disney and barely give him the same opportunity three yea
Slide 27: The Succession Process is Broken
Confidential – Not for Reproduction or Distribution The Succession Process is Broken Disney has failed to execute on succession planning – one of the most important responsibilities of a public company Board On November 20th, Disney announced that Bob Iger was rehired as CEO, effective immediate
Slide 28: CEO Succession Has Been a Long Time Issue for Disney's Board
Confidential – Not for Reproduction or Distribution CEO Succession Has Been a Long Time Issue for Disney’s Board Most notably, the Board extended Bob Iger’s agreed upon retirement date five separate times between October 2011 and December 2017 By continuing to extend Bob Iger’s contract, rather
Slide 29: Executive Compensation Must be Aligned with Performance
Confidential – Not for Reproduction or Distribution Executive Compensation Must be Aligned with Performance From FY17 - FY21, Bob Iger received $216mm(1) in total compensation despite Disney’s poor TSR Iger’s compensation would have been even higher had shareholders not voted against the pay pac
Slide 30: Disney's Streaming Strategy: Ready, Fire, Aim?
Confidential – Not for Reproduction or Distribution Disney’s Streaming Strategy: Ready, Fire, Aim? We are concerned with how Disney’s streaming strategy has evolved under the Board’s oversight While we believe Disney+ started as a niche DTC extension of Disney’s franchise “flywheel,” it has rapi
Slide 31: Disney Has Lost $11bn in Streaming to Date with More Losses Coming
Confidential – Not for Reproduction or Distribution Disney Has Lost $11bn in Streaming to Date with More Losses Coming Since 2017, Disney has lost a cumulative $11bn in its streaming business Management expects the streaming business to break even in 2024, which means two more years of expected
Slide 32: Disney Does Not Leverage its Substantial Scale in Streaming
Confidential – Not for Reproduction or Distribution Disney Does Not Leverage its Substantial Scale in Streaming Disney is guiding to DTC operating profit “breakeven” in 2024, when the market expects the business to generate ~$29bn of revenue We are surprised that Disney’s best-in-class IP, franc
Slide 33: Disney's Current Streaming Strategy is Leading to Inefficiencies
Confidential – Not for Reproduction or Distribution Disney’s Current Streaming Strategy is Leading to Inefficiencies Disney’s DTC segment appears to be less cost efficient than Netflix NFLX spends +34% …and NFLX NFLX generates +61% NFLX spends ~30% more on programming EBIT margins are more revenue
Slide 34: We Believe Disney Lacks Cost Discipline as an Organization
Confidential – Not for Reproduction or Distribution We Believe Disney Lacks Cost Discipline as an Organization Despite management’s rhetoric, we believe Disney has never thoroughly reviewed its cost structure, as evidenced by the fact that over the last three years costs have outpaced sales growth
Slide 35: We Fear Disney is "Over-earning" in Domestic Parks to Subsidize Streaming Losses
Confidential – Not for Reproduction or Distribution We Fear Disney is “Over-earning” in Domestic Parks to Subsidize Streaming Losses Disney has historically relied on price to drive growth and margin at domestic Parks, which we believe is an unsustainable growth strategy ‒ Before the COVID-19 pand