Blackwells Capital Sues Disney Seeking Details of ValueAct Relationship

In the latest twist in the Disney proxy fight, Blackwells Capital filed suit Thursday suggesting possible disclosure violations in how the entertainment giant dealt with hedge fund ValueAct Capital.

Reuters reported the suit, filed in a Delaware court, focuses on the relationship between Disney and ValueAct Capital and an information-sharing agreement the two signed in January. The suit includes a demand from Blackwells to inspect records to “investigate its credible suspicion of wrongdoing regarding Disney’s dealings and disclosures related to ValueAct.”

Disney told the news outlet the suspicions are “baseless” and said the lawsuit is a “desperate attempt to gain attention for their slate of director candidates.”

Blackwells, along with another hedge fund, Nelson Peltz’s Trian Fund Management, is trying to convince investors to shun several of Disney’s board of directors candidates and vote in their own at the company’s annual shareholders meeting on Wednesday.

Blackwells, which is looking for three seats on Disney’s board, has proposed a major review of Disney’s real estates and strategy, with the possibility of splitting off parts of the company. Trian is seeking two seats, with Peltz focused largely on Disney’s plan for choosing a successor to CEO Bob Iger, along with upping profit margins from streaming.

Disney, Peltz and Blackwells have been inundating shareholders with messages and mailers in their efforts to draw votes for their candidates in recent weeks. Two shareholder advisory firms issued split decisions on the board nominations last week, with Glass Lewis backing Disney’s slate and Institutional Shareholder Services backing Peltz’s election, though not Trian’s second candidate, former Disney CFO Jay Rasulo.

ValueAct Chief Investment Office and CO-CEO Mason Morfit is backing Disney’s efforts to keep its board intact. The company praised Disney’s efforts to bolster its theme parks and move beyond the streaming wars in a presentation to investors early this month.

Disney was not invested with ValueAct and the firm no longer managed any money for the company when it started to build its stake in Disney last year, Reuters reported, citing a person familiar with ValueAct’s business. The exact size of ValueAct’s Disney holdings is not known.

ISS, in its report to investors last week, wrote that ValueAct “indicated that although its investment team met with Bob Iger on very limited occasions in the years prior to its investment in Disney, Mason Morfit and Bob Iger do not have a personal relationship.”

Disney told Reuters that “no Disney pension plan funds are currently invested with ValueAct nor were they managing any Disney pension plan funds at the time of their entering into an information-sharing agreement with the company.” Disney told the outlet it offered to meet with Blackwells “to provide documentation confirming those facts, but Blackwells declined the meeting.”

The suit is not the first time that Blackwells has raised concerns about the Disney-ValueAct relationship. Earlier this month, the hedge fund accused Disney of failing to disclose that it had paid up to $95 million in fees beginning in 2013 to ValueAct to manage Disney’s pension fund assets. It noted that the firm was paid for management services through 2022.

A Blackwells spokesperson told the outlet, “Shareholders are entitled to full disclosure about the ValueAct relationship including, among other things, all fees to it by Disney in the 10-year period leading up to ValueAct’s endorsement of the board.”

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