A multilayered media war will begin Wednesday in Philadelphia, pitting Walt Disney Co. against Comcast Corp., Disney factions against each other, and media activists against an industry bent on consolidation.
Investor demands to unseat Disney Chairman and Chief Executive Michael Eisner may be the main event at the media giant’s annual meeting, which was scheduled for Philadelphia long before Comcast made a roughly $50 billion hostile takeover bid. Comcast’s headquarters are three blocks from meeting site.
While investors for and against Eisner face off inside the Pennsylvania Convention Center, activists opposed to media consolidation are planning a rally Wednesday to stanch attempts to merge the entertainment powerhouse with the country’s largest cable TV company.
“Those are a lot of pieces,” said Reed Hundt, former chairman of the Federal Communications Commission under President Bill Clinton. “The main drama here is a drama about financial markets, and what stockholders want. Comcast wants to expand into content; they’re not being driven by the Disney drama.”
Plenty of drama surrounds Eisner, Disney’s CEO since 1984. He faces what amounts to a confidence vote.
Normally, when a corporate board puts up a slate of executives for re-election, approval is nearly unanimous. But a series of missteps at Disney’s theme parks, its animation unit and its ratings-challenged television network, ABC, has brought Eisner stockholder dissent.
Multimillion-dollar payouts to former executives, such as Michael Ovitz, who Eisner hired and then fired 14 months later, only exacerbated angry calls for change.
Roy Disney, nephew of company founder Walt Disney, ignited the effort to dethrone Eisner in November, when the company’s board of directors, citing a mandatory retirement clause, asked for the 74-year-old Disney’s resignation.
Rather than resign, Disney quit. But as the company’s largest individual shareholder, with about 17 million shares, he still carries considerable clout. Eisner is the second-largest individual shareholder, with about 14 million shares.
On Tuesday, Roy Disney plans to hold a “Save Disney” gathering at a Philadelphia hotel. Organizers are expecting about 300 people, while 2,000 shareholders are expected at Wednesday’s meeting.
Meanwhile, state employee pension funds with large holdings in Disney stock, including those in Ohio, New York, New Jersey, North Carolina, Oregon and California, started last week to call for Eisner’s reign to end.
“Momentum on this has really been growing,” said Kevin Calabrese, media analyst at Argus Research Corp. “Investors are expressing a collective frustration with share price and five years in which the company has underperformed.”
At last year’s shareholder meeting in Denver, the vote against Eisner totaled 8 percent. Calabrese said that number is likely to reach at least 30 percent this year.
At a minimum, Calabrese said, Disney’s board is likely to adopt a call by proxy adviser group Institutional Shareholder Services to create separate posts for chairman and CEO. Eisner holds both positions, but if the shareholder meeting goes poorly, he may lose the chairmanship.
ISS, which supports removing Eisner, represents clients who control about 35 percent of Disney’s shareholder base.
It won’t be clear until Wednesday afternoon just how many shareholders oppose Eisner. Technically, because Eisner is running unopposed, Disney’s corporate bylaws say he can retain both executive positions as long as he receives at least one vote, said David Koenig, a Disney shareholder activist.
Although Eisner hopes to cool a budding palace coup, Brian Roberts, Comcast’s president and CEO, is betting that shareholder dissatisfaction will strengthen interest in his takeover offer, valued at $49.3 billion at the close of trading Monday.
Roberts’ immediate problem is that since Feb. 11, when Comcast’s takeover offer was made public, Disney’s stock is up 10 percent. Under terms of the deal and based on Monday’s share price, Disney shareholders would receive $23.63 a share if they agreed to sell to Comcast, well below the company’s closing price of $26.87.
Roberts has said he does not plan to raise his offer.
Disney shareholder groups, sources say, are likely to take advantage of the proximity to Comcast to touch base with officials of the cable giant. Disney selected Philadelphia as the site of this year’s annual shareholder gathering because the company owns a local ABC-TV affiliate.