Activists Accuse Disney of Secretly Paying Millions for Shareholder Support

Blackwells Capital, the activist investor group currently opposing both the Walt Disney Company and Trian Partners in an upcoming proxy battle, is accusing Disney of providing a powerful ally with tens of millions of dollars for its support.

The battle for control over the Disney board of directors (and, effectively, control over the company’s future) has been a wildly contentious one, with three major factions all attempting to sway the majority of shareholders to vote for them. The Walt Disney Company is pleading to keep the board as is, including CEO Bob Iger. Trian Fund Management, a firm worth over seven billion dollars, is pushing for co-founder Nelson Peltz and former Disney CFO Jay Rasulo to take the reins, and Blackwells Capital, an activist investor group, has nominated Jessica Schell, Craig Hatkoff, and Leah Solivan Related: Disney CEO Bob Iger Quietly Dumps Company Stock Before Billionaire Showdown

While each faction has supporters, Disney made a major ally when ValueAct Capital gave Bob Iger and the current board a strong endorsement, which the company immediately turned into a press release. However, Blackwells has now released a new letter and an extensive presentation claiming that ValueAct had been paid some $95 million in fees by Disney while managing the Mouse House’s pension funds. Blackwells seems to be implicitly stating that there must be a connection between the Bob Iger endorsement and the millions of dollars paid to ValueAct, as well as questioning why the financial relationship between the two companies was not made explicitly clear to other shareholders.

In a press release, Blackwells said:

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. 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.

This is not the first time that Blackwells has questioned the coziness of the arrangement between Disney and ValueAct. We previously reported on the agreement between the two companies that allowed for the iconic media company to strike an information-sharing deal with ValueAct that essentially gives the latter confidential information not disclosed to other shareholders. Needless to say, Blackwells was not pleased.

Now, Blackwells is asserting that its discovery of the previously existing financial relationship between Disney and ValueAct means that the Mouse is hiding more than it seems and needs to give all its shareholders access to information. The release continues:

Can this Board believe that shareholders are able to evaluate the significance of ValueAct’s endorsement without a full understanding of the relationship? Why didn’t ValueAct and its principal, Mason Morfit, insist on disclosing ValueAct’s management of Disney’s pension funds in the January 3 press release—when, as fiduciaries to these funds, they certainly knew about these facts? Did the Board violate Disney’s Code of Ethics and commitment to transparency by failing to disclose ValueAct’s management of Disney’s pension funds after publicly accepting ValueAct’s endorsement?

Related: Walt Disney’s Heirs Support Bob Iger as Billionaire Tries To Oust Him Blackwells Capital has generally been considered a distant third in the race to control the Disney board. Prior to this report, it seemed like things were neck and neck between Bob Iger and Nelson Peltz, but this new bombshell report could dramatically change things. The full Blackwells presentation on ValueAct can be read here: Inside the Magic reached out to Disney and ValueAct for comment, but has not heard back by the time of publishing. What do you think of this latest development in the Disney proxy battle? Tell us in the comments below! This post Activists Accuse Disney of Secretly Paying Millions for Shareholder Support appeared first on Inside the Magic.