Credit: Inside The MagicLess than a week before a crucial Disney stock vote that will affect it for decades to come, the Walt Disney Company has been hit by a huge lawsuit demanding that its financial books be opened to prove its financial mismanagement.
On April 3, Disney shareholders will be faced with a choice of who to bring to the new board of directors: Nelson Peltz and Jay Rasulo from Trian Fund Management, CEO Bob Iger and the existing Disney board, or Jessica Schell, Craig Hatkoff, and Leah Solivan from Blackwells Capital. While the battle between Peltz and Iger has dominated the headlines regarding this unusually heated and public battle for corporate control, Blackwells Capital has remained a strong competitor and threatens to split the vote from either Trian or Disney.
Related: Disney CEO Bob Iger in Danger as Crucial Boardroom Ally Turns Against Him
Blackwells Capital is a well-known activist investor group that has quite the reputation for quietly buying shares of a corporation, seizing its board of directors, and steering it in its desired direction; basically, they specialize in polite corporate takeovers.
That is exactly what Blackwells Capital is trying to do with the Walt Disney Company, in direct competition with Nelson Peltz and former Disney CFO Jay Rasulo. But where Peltz and Rasulo have kept their (increasingly aggressive) attacks against Bob Iger and Disney largely to the press and slideshow presentations, Blackwells Capital is taking it to the courts.
Blackwells Capital has filed a lawsuit (per Deadline) against Disney, claiming that the Mouse has an inappropriate financial relationship with ValueAct Capital, a fellow investor group that has supported Bob Iger and the existing board. Previously, Blackwells has accused Disney and ValueAct of concealing the fact that the latter group had managed pensions for the iconic media company.
In a press release, the investment group stated, “Blackwells diligence revealed that the Board failed to disclose in the press release that ValueAct or its affiliates have been managing over $350 million of Disney’s pension fund assets, and that ValueAct has been earning fees ranging from approximately $55 million to $95 million for the services provided to Disney’s pension fund since as early as 2013.”
Related: Disney Stunned With Devastating Blow by Billionaire Investor, Board Coup Possible
Essentially, Blackwells Capital was claiming that ValueAct’s support for the existing board was linked to the tens of millions of dollars it had received in fees, continuing, “ValueAct’s management of Disney’s pension funds is not disclosed anywhere in any of the referenced communications. Meanwhile, Disney’s entire shareholder franchise population has been led to believe that ValueAct provided its independent and unqualified support of the Board independently.”
Now, the investor group has made those claims official. The lawsuit demands that Disney open ” books and records in order to determine whether wrongdoing, mismanagement, or breaches of fiduciary duty, including potential violations of disclosure obligations under the federal securities laws, have taken place.”
As one might expect, Disney has called these claims “baseless” (per Reuters) and a “desperate attempt to gain attention for their slate of director candidates.” To be fair, this is definitely an eleventh-hour lawsuit to bring against a company that one is trying to basically takeover, but it will remain to be seen whether it has any effect on shareholder votes.
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