Shareholders vote on Nelson Peltz and Bob Iger

Bob Iger poses with Mickey Mouse attends Mickey’s 90th Spectacular at The Shrine Auditorium on October 6, 2018 in Los Angeles.

Valerie Macon | AFP | Getty Images

Disney shareholders on Wednesday will settle a long-simmering proxy battle led by billionaire investor Nelson Peltz.

Voters will decide whether the company’s board deserves another year together, or if candidates nominated by activist investors, including Trian Partners’ Peltz, should replace certain directors.

Disney’s 2024 annual meeting will begin at 1 p.m. ET on Wednesday. Disney will air a live webcast of the event, which typically lasts about two hours.

The 81-year-old Peltz, along with former Disney Chief Financial Officer Jay Rasulo, have waged a quest to land two board seats. They’ve asked shareholders to name them as new directors in place of Maria Elena Lagomasino and Michael Froman.

Disney has secured enough votes to win at the shareholder meeting, Reuters reported Tuesday evening. If the reported votes hold, it would be a significant victory for CEO Bob Iger and a Disney board that has fought hard to keep Peltz and Rasulo at bay.

Nonetheless, Trian can at least claim a financial victory. Shares are up 48% since the firm’s second campaign was first reported.

Peltz, who dislikes being called an activist but has orchestrated successful campaigns at iconic companies like PepsiCoP&G and Wendy’s, controls a $3.98 billion stake in Disney, or about 2% of total shares outstanding. Most of those shares are owned by former Disney executive and Marvel CEO Ike Perlmutter, who has supported Peltz and is paying a portion of the expenses relating to soliciting proxies, according to an SEC filing.

Trian claims Disney’s board has failed to generate sufficient returns in recent years as subscription streaming losses have mounted and traditional TV subscribers have declined. Trian has also argued Disney’s board has struggled to plan succession, noting Iger has renewed his contract as CEO five times and had to return to the post in late 2022 after his handoff to Bob Chapek failed.

Jay Rasulo and Nelson Peltz.

Patrick T. Fallon | Bloomberg | Getty Images | Adam Jeffery | CNBC

Disney has countered that Iger has been righting the ship since his return as CEO, and the company should be left to recover without distraction. The company also said Iger and the board are carrying out a robust succession vetting process, which should be left uninterrupted.

“The whole board is leaning into this forward-looking, forward-leaning, incredibly disciplined [succession] process,” said Morgan Stanley executive chairman James Gorman, who joined the Disney board in February, in an interview with CNBC’s “Squawk on the Street” last week.

Billionaires Bill Ackman and Elon Musk both, neither of whom own Disney shares, endorsed Peltz in the waning hours of the fight.

“I strongly recommend that shareholders vote for Nelson Peltz for the Disney board,” the activist investor Ackman wrote in a lengthy post.

Disney shares closed Tuesday at $122.82, up 55% from a low of about $79 on Oct. 27 but down 38% from $197 three years ago. The stock has jumped 36% year to date, compared to a 9% gain for the S&P 500.

Early vote count

“Turnout in contested elections tends to be higher, because both sides are soliciting votes” from large and small shareholders, said 13D Monitor founder and president Ken Squire.

Institutional investors own the other two-thirds of Disney’s stock. BlackRock, Disney’s second-largest shareholder, plans to back the company, the Journal reported Monday. CNBC has confirmed T. Rowe Price, which owns about 9.3 million Disney shares, according to FactSet, is also backing Disney. Institutional shareholders can change their vote up until Wednesday’s meeting.

“We are comfortable that management has a viable plan to address the important matters facing the company,” a T. Rowe spokesperson told CNBC.

Iger also has the support of Mason Morfit’s ValueAct Capital, which has a history of pushing for strategic change. The two sides signed an “information-sharing agreement” in January, allowing Morfit access to nonpublic information. ValueAct owns just 0.28% of outstanding Disney shares, but its value to the company extends beyond voting. Disney has been able to tap ValueAct’s network and expertise when it has pitched institutional investors.

The California Public Employees’ Retirement System (CalPERS), Yacktman Asset Management, and Neuberger Berman have expressed their support for Peltz and Rasulo.

Even for seasoned advisors, it’s difficult to predict how major institutions will vote. The high-profile nature of the fight and the mixed recommendations from proxy advisory firms can make it even trickier.

“As the stakes grow higher, so does shareholder independence,” said Saratoga Proxy senior partner John Ferguson, who is not involved in the Disney-Trian situation. “At Disney, more than most fights, you’re going to see shareholder independence.”

Trian may have signaled it has become concerned Rasulo — who was trailing Peltz in early vote tallying, according to the Journal — won’t get enough support to land a seat. The activist fund filed a document Monday specifically focused on removing Lagomasino.

“She has overseen years of poor shareholder returns and deteriorating financial performance,” Trian wrote in its materials to shareholders. “Her background in wealth management is not relevant to Disney’s business and she does not have any skills that are central to Disney’s strategy that others directors do not also possess.”

Voting for retail shareholders closed Tuesday night. Disney estimated it would spend $40 million soliciting support from shareholders. That figure doesn’t account for the time and energy that Iger and his top management team have put into meeting with top shareholders.

Trian estimated it would spend $25 million on the fight. Peltz, his top lieutenants and their advisors met with investors throughout March.

Advisory recommendations split

Nelson Peltz, founding partner and CEO of Trian Fund Management, speaks with CNBC’s Andrew Ross Sorkin on July 17, 2013 in New York.

Heidi Gutman | CNBC, NBCU Photo Bank, NBCUniversal via Getty Images

The top shareholder who spoke to CNBC said ISS’ decision to support Peltz over Lagomasino was a significant surprise.

While it supported Peltz, ISS said shareholders shouldn’t back Rasulo, citing his previous positioning as a potential successor to Iger.

“Though we do not have any concerns about his ability to serve as an objective director, we recognize that Rasulo’s potential presence might create added friction on the board,” ISS wrote.

Blackwells could play spoiler

Don’t miss these stories from CNBC PRO:

WATCH: Disney board battle reaches final moments