Nelson Peltz versus Disney

This is an audio transcript of the FT News Briefing podcast episode: ‘Nelson Peltz versus Disney’

Marc Filippino
Good morning from the Financial Times. Today is Monday, January 30th, and this is your FT News Briefing.

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A CNBC host recently asked activist investor Nelson Peltz why he’s targeting Disney for a board seat.

CNBC host
Why Disney and why you?

Nelson Peltz
Why not? We have skin in the game.

Marc Filippino
There’s a bit more to it. We’ll chat with the FT’s Anna Nicolaou later on in the show. And bond markets have been rallying, but are they over-optimistic? But first, one of India’s biggest conglomerates is on the defensive. I’m Marc Filippino and here’s the news you need to start your day.

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A New York investment firm last week accused India’s powerful Adani group of stock manipulation and accounting fraud. Shares in the Indian multinational took a huge hit. So did the personal wealth of founder Gautam Adani. Yesterday, the Indian conglomerate punched back at the report from Hindenburg Research. Here’s the FT’s Ben Parkin in New Delhi.

Benjamin Parkin
The Adani Group late on Sunday night put out a lengthy and very angry rebuttal to the Hindenburg allegations. Adani, first of all, claimed that this was not just an attack on them, but an attack on India, Indian business and Indian institutions and their integrity. They also went in sort of batches and dismissed a lot of the questions as being, you know, baseless, discredited, misleading and so on. But they added about, you know, 300, nearly 360 pages or so of various documents in annex to back up their responses.

Marc Filippino
Ben says Hindenburg’s accusations are a big test for the Adani Group.

Benjamin Parkin
They’ve grown very fast in the past few years to become one of the absolute largest companies in India, with a massive presence in infrastructure, in logistics and commodities. So they’re really quite central to India’s economy and India’s financial system because they have a lot of debt. Their listed companies are really big features of India’s stock market. For them to be challenged and questioned in this kind of way — very internationally at a time when they’re trying to raise more money — it will be a real test for the group, particularly given how they’ve come to, in a sense, symbolise a lot of Indian business overseas. They’re one of the most active Indian groups internationally. They’ve expanded internationally. So there’ll be a lot of scrutiny now on how investors respond.

Marc Filippino
Now, the timing of Hindenburg’s allegations is also part of the story. Hindenburg is known as a short seller. So it bets against companies and profits when a stock falls. It’s research came out two days before one of Adani Group’s companies launched a big share sale.

Benjamin Parkin
The Adani group claims that was designed to affect the follow on share sale to one of their group companies, Adani Enterprises, was launching on Friday. Now it’s had a big impact, safe to say, on Adani stocks. They fell $50bn last week in the two days of trading and wiped around $20bn or so of Gautam Adani’s personal wealth. There’s been reports over the weekend that the Adani Group is, was considering amending the share sale in some way. They’ve denied that and said they’re going ahead with the share sale as planned and will continue to wrap up on Tuesday afternoon.

Marc Filippino
Ben Parkin is the FT’s South Asia correspondent.

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The Federal Reserve and other leading central banks are set to raise interest rates this week to their highest levels in 15 years. Now, at the same time, bond prices have been rebounding from last year’s sell-off. Markets are betting that inflation and the pace of rate rises are gonna slow. Here’s the FT’s Kate Duguid.

Kate Duguid
And so people are sort of excited that things may be starting to turn around, right, and that interest rates may finally be starting to come down, or at least the pace of hikes has slowed and also that inflation has finally started to moderate a little bit. We’re also seeing bonds rally because investors can get such good returns, right, and so we’re also seeing people move into the market who are just excited about getting those higher yields.

Marc Filippino
Markets are pricing in two cuts by the Fed by the end of this year. But Kate says analysts worry that markets are over-optimistic. Here’s what they’re saying.

Kate Duguid
We are currently not pricing in a sufficient amount of risk. We’re not pricing in the fact that, you know, we could see a recession in the United States. We’re not pricing in the fact that inflation may stay sticky. We’re not pricing in the fact that central banks will need to maintain high rates in order to, to meet that sort of stickier inflation. And what that would mean would be that yields would stay high or would rise, right, meaning that prices would fall. And so these people who have piled in, these investors that have piled into bonds at the start of the year, they wouldn’t perform as well as they’d like.

Marc Filippino
Kate Duguid is the FT’s US capital markets correspondent.

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Activist investor Nelson Peltz wants a seat on Disney’s board. He says the company has a balance sheet from hell thanks to a 2019 acquisition of Fox’s movie and television assets. For more about the boardroom drama, I’m joined by the FT’s Anna Nicolaou. Hey, Anna.

Anna Nicolaou
Hi.

Marc Filippino
Tell us a little bit about who Nelson Peltz is. He’s this activist investor. What’s motivating him?

Anna Nicolaou
So Nelson Peltz is a longtime investor. He’s 80 years old. He lives in Florida. He spent the past couple of decades operating this company called Trian, that he founded. They will basically find a company that they think is operating in a way that is not super efficient, lobby for a board seat, lobby for various changes. And the idea is, you know, you boost the share price and everyone wins. He’s probably most famous for, five years ago, he took on Procter & Gamble, this gigantic consumer goods company in the US. These campaigns that he does with these big companies can get kind of bitter and he’ll, you know, go out to the press, hurl insults at the company. And in that one, he got a board seat and he pushed for all these changes. And the stock price did go up quite a lot. So that kind of cemented his reputation. My favourite fact about him is that his daughter is Nicola Peltz, who is married to Brooklyn Beckham. But that’s (laughter) not, not related to this . . . 

Marc Filippino
It’s . . . 

Anna Nicolaou
Story in a particular . . .

Marc Filippino
(laughter) It’s very, it’s very relevant . . . 

Anna Nicolaou
Yes.

Marc Filippino
Aside from being related tangentially to a Beckham, you mentioned that he’s an activist investor who is well-known for his proxy battles. So he looks at Disney and his problems with the Fox acquisition back in 2019 that I had mentioned. What’s his main argument there?

Anna Nicolaou
His main argument is that it was too expensive. It was a bad deal for Disney and increased their debt, which just made it more difficult for them to kind of hand money over to shareholders.

Marc Filippino
$42bn, right?

Anna Nicolaou
Yeah. So at the time, this was kind of right before Disney and other big US media companies decided that they were gonna, you know, take on tech companies like Netflix and start this streaming war. And so the idea was Disney needed to get bigger so they would have enough TV shows and movies to create a compelling rival to Netflix. That was the rationale at that time for that deal.

Marc Filippino
Does, does Peltz want to help the company? Does he just see that Disney might be vulnerable and wants to pounce on the opportunity? What’s his thinking here?

Anna Nicolaou
I would love to know that. Um. (laughter) I mean, we could, we could speculate. It’s his ego. It’s . . . he is bored, has nothing else to do which various analysts and people are saying. I mean, you could say, you know, he’s operating in good faith. He thinks that Disney investors are being short-changed here. But it does create, you know, quite a problem, lot of problems for Disney if you . . . Bob Iger has just returned to the company. He has tons of things he needs to fix and deal with. And on top of all that, he has this guy on CNBC kind of yelling all the time and telling shareholders that Disney is doing poorly.

Marc Filippino
Bob Iger, of course, is the legendary CEO who the board brought back last November to replace his unpopular successor. What does the board think about Peltz trying to get a seat at their table?

Anna Nicolaou
So the board so far, yeah, has resisted allowing him to join. And it seems like they’re pretty aligned with Iger in terms of saying, you know, we have our leader back, we’re better off doing this on our own. He doesn’t know what he’s talking about. So Peltz has started a proxy fight, and this will go to a vote with shareholders.

Marc Filippino
Anna Nicolaou is the FT’s US media correspondent. Thank you, Anna.

Anna Nicolaou
Thank you.

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Marc Filippino
You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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