Blackwell Capital Files Proxy Statement and Puts Out Shareholder Letter. Want To Divide The Company.

Published: February 7, 2024

The third contender in the Walt Disney Board seat battle has finally issued a letter and officially joined the proxy war. Blackwell Capital has three nominees for board seats and is urging shareholders to vote with the Green Card for them. However, their plan is to divide the Walt Disney Company into three companies. I don’t think that is going to sit well with a lot of shareholders.

Blackwell has put up Jessica Schell, Craig Hatkoff, and Leah Solivan for board seats. Each one happens to specialize in one of the three areas they feel “the future of Disney depends” on. These are media and content; real estate and strategic asset review; and physical, spatial computing and AI-driven experiences.

How would Blackwell Capital nominees benefit the Walt Disney Company Board?

According to their recent letter, Blackwell wants to provide focus on three areas. Each nominee specializes in one. 

Media and content would be where Jessica Schell would come in as she worked in media for Warner Bros, Comcast Universal and the Walt Disney Company. She also was on the team that launched Hulu. 

Frankly, of the three nominees, she’s the one I think should be added to the board.

For real estate and strategic asset review, Blackwell Capital has chosen Craig Hatkoff. Hatkoff has experience in the REIT (hospitality real estate investment trust) and other real estate experience.

He wants to separate Disney’s owned real estate into a REIT for more shareholder wealth.

Disney could separate its owned real estate, which represents approximately 44% of its market capitalization at cost, into an independent publicly listed REIT or a series of investment vehicles in which the shares, cash and/or interests could be distributed to shareholders.

The final candidate,  Leah Solivan, would focus on the “physical, spacial computing and AI-driven experiences” to make more attractions at the parks AR/VR based, which I do not think is a great idea personally.

Disney has arguably the greatest opportunity set of any media company in the world as it pertains to AR/VR given its breadth of media content. Imagine a Disney World where you could have a lightsaber spar with a Jedi on Tatooine, or team-up with Simba and traverse the African plains!

As for dividing the company up, the letter Blackwell Capital sent out said:

Mr. Hatkoff’s substantial expertise extends to exploring all strategic possibilities with cold eyes, including the potential separation of Disney into three entities, beginning with a management reorganization and leadership selection for each business and resulting in standalone public companies. Disney may simply be too complex for any one successor to Mr. Iger to manage holistically, and Blackwells believes that it is the responsibility of the Board to oversee these types of analyses in the ordinary course.”

I do not think most shareholders will want to split the company into three entities to have separate companies and leadership for each one. They aren’t clear about what exactly each of the three new companies would entail. Just that new leadership and management would need to be assigned (which would conveniently align with each nominee from Blackwell).

The one point they did make that I agree with is that the deal the current Walt Disney Board has made with ValueAct Capital could be unfair to other shareholders and investment groups.

ValueAct promised to help the current board, and to do so, Disney “entered into a confidentiality agreement that enables the company to provide information to the investment firm and consult with ValueAct on strategic matters, including through meetings with the Disney Board and management.

Blackwell Capital’s letter made a point to mention this, and they want to undo that agreement, saying:

Moreover, recent concerns surrounding an information sharing agreement between Disney and ValueAct, are proof positive that independent and new perspectives are necessary. Disney’s share price suffers from a significant information discount, as recently noted by several key market analysts. Showering one shareholder with information that is withheld from all other shareholders, will only make matters worse.

We intend to ensure for all shareholders that this arrangement is terminated or that shareholders are given the same access to information that ValueAct seems to enjoy.

I’m not sure the plans that Blackwell Capital has will resonate well with shareholders. They also mention that they want to help the current board and follow their lead along with Disney CEO Bob Iger. The issue is that the current board and Bob Iger were the ones that put Disney into the tailspin it is now facing. 

If you are a shareholder, you now have three choices for voting. White= Current Disney Board. Blue= Trian Partners with Nelson Peltz and former Disney CFO Jay Rasulo. Or Green= Blackwell Capital for Jessica Schell, Craig Hatkoff, and Leah Solivan.

No matter who wins, the takeaway is that Disney is in trouble, and investors want better leadership. Not just one group but three have stepped in for change. 

What do you think? Comment and let us know!

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