WHEN: Today, Wednesday, February 14, 2024
WHERE: CNBC’s “Money Movers”
Following is the unofficial transcript of a CNBC exclusive interview with Trian Partners Founder Nelson Peltz on CNBC’s “Money Movers” (M-F, 11AM-12PM ET) today, Wednesday, February 14. Following is a link to video on CNBC.com:
All references must be sourced to CNBC.
SARA EISEN: Joining us now in an exclusive interview, Trian Partners founder, Nelson Peltz. Welcome. Nice to have you, Nelson.
NELSON PELTZ: Good morning, Sara. Nice to be here.
EISEN: Good morning. So, Nelson, the street seemed to love Disney’s earnings report and all its announcements. Why didn’t you?
PELTZ: Well, before we get started, I want to say Happy Valentine’s Day to my beautiful wife, to my family, and all the Disney shareholders. Vote blue. Go get them. Now what’s your question?
EISEN: My question is, the earnings reaction, and Happy Valentine’s Day to you. But the earnings reaction. Markets seem to like it, Nelson. I mean, the stock is up double digits since the report. It’s up more than 20 percent year-to-date. So, what were you not satisfied with there?
PELTZ: Well, it’s not that I’m not satisfied. You know, this company sells at a multiple of their pronouncements, you know, a very high multiple. They made these announcements like this management team just came into office about a week and a half ago. They have been here for 20 years. All of a sudden, they’ve awakened, and they want to start making all of these announcements? By the way, there’s very little meat on the bones on their announcements. The epic games, $1.5 billion. What’s the return? What are we getting as shareholders? Nice announcement, I hope. They don’t have a long history in video games that’s very positive. So — and Taylor Swift, I think that’s great. I’m a fan, OK?
EISEN: Hard to argue with Taylor Swift.
PELTZ: A real fan. I love her. That’s right. Can’t argue with that. And the increase —
EISEN: What about — you mentioned the epic.
PELTZ: Hold it. Hold it.
EISEN: OK. OK. Go ahead.
PELTZ: The increased buyback, OK, the increased buyback. The increased dividend, as a shareholder, I love it. But can we really afford it? This company has spent over $200 billion, $200 billion since 2018, OK? We’re cash flow negative, earnings are down. The balance sheet has been really injured, as a result of a terrible deal, which lost the dividend for four years. And we just got it back. And we got it back, I think, because we’re present. So you know, these pronouncements, this reminds me of a politician making election day announcements versus State of the Union speeches. State of the Union is what I want to hear about, not election day promises.
EISEN: On the point about dividends and buybacks, Hugh Johnston, the new CFO, you know him well, I know him well from PepsiCo. Don’t you think that he wouldn’t put those two announcements in place without the confidence in the free cash flow guidance? Do you not believe the $8 billion guidance?
PELTZ: You know, Sarah, I’m glad you brought that up. Hugh, when he was questioned after Iger’s speech, could not give any detail about the $1.5 billion for Epic Games, couldn’t do it. Couldn’t tell us anything. They made an announcement on a new ESPN joint venture with Warner and FOX, and the NFL didn’t even know about it. They were caught by surprise. And how is that JV going to work if Warner’s NBA contract, which is coming up for renewal very soon, it’s going to be quite expensive, my guess. What’s going to happen if they lose that? What does Warner have to add to this? So, you know, these are just a lot of empty promises. These are election day comments, OK? And Bob is making — is talking like he just got into office a week ago. This is a management team that’s been there for 20 years. And for 20 years, TSR, for one year, three years, five years, 10 years, now going close to 20 years, has been down versus the S&P. That’s a real issue. And yet, the guy has become a billionaire? He’s got — and I’m thrilled if the CEOs of the companies we invest in make a ton of money. We want them to be the highest paid executives in their industry. But only if we, the shareholders, the great unwashed, are making money along with them. These two things have gone in different directions. Compensation up, shareholder value down. That doesn’t work for me.
EISEN: So it’s largely a governance — I mean, a lot of the criticism, it sounds like, Nelson, is on governance. One of the questions that I always get and always hear about you is, so what do you plan to bring to the board? Because a lot of your experience and expertise, and I’ve covered a lot of it, has been in CPG or consumer names like Wendy’s and Mondelez and P&G and Sysco and Unilever. Why Disney, which is so different in terms of its DNA?
PELTZ: First of all, Disney is probably one of the best, if not the best amalgamation of brands that exist today. And you know, Bob asked me when — way back when, in 2018 or ’19, to address his board, and he gave me five subjects he wanted me to discuss. The fifth subject was the media business. And then he goes on to say that I know nothing about the media business and I’m not going to argue with that issue. But I wonder if the Disney board and the Disney management team, do they know anything about the media business? This company has put forth five losers in a row, five. Think about, that’s a record — I don’t know that anybody has put on five losing movies with brands like they have, Marvels, et cetera, in a row. So, you know, they supposedly know something about the media business. I’ll go with somebody who supposedly doesn’t know anything about the media business. Even one out of five is better than five out of five.
EISEN: No, I think it’s fair criticism and it would be hard for them to argue that with the recent slate, although I do wonder how you fix that at the board level.
PELTZ: Well, I think what you do at the board level is you start to make sure you have the right creative people in place. You know, if you have people who are deciding on what movies, what streaming features to put out there, while they’re losing subscribers on Disney Plus, the most important thing they have, then maybe it’s time to change those people. I’m not making a judgment from out here, but when I get on the board, I want to see their track record. Track records are what it’s all about. It’s a track record and when you have a CEO, you want him to come with a little crystal ball. Not perfect, but starting to look into the future a little bit because that’s what you’re banking on, his judgment. Now, go back to 2015, ’16, Bob made statements and accurate statements saying that, you know, this streaming thing, it’s here to stay, it’s an important part of the entertainment industry. And that was great. But what was done about it? Nothing. Disney didn’t do anything. Think about if they did something with streaming way back when, think about the value of ESPN in ’15 and ’16. Probably the most valuable offering on linear TV was ESPN. $100 million subs. Today, 60 million and declining. OK, today, they’re scrambling to make deals. I mean, I’m so confused, they have an ESPN Plus, they have a flagship, they have a JV. I don’t know what — I don’t know what’s what. I hope that they know what’s what. But I am really confused.
EISEN: What do you think they should do with ESPN?
PELTZ: Let me tell you, I don’t know. I’m not a — I don’t have the inside baseball numbers, but once I’m on the board, I can formulate a good opinion. That’s for sure.
EISEN: Last week, after earnings, our Julia Boorstin spoke with Bob Iger, CEO of Disney, about the quarter. She also asked him about you and whether he’s had interaction. I just want to play for you this sound bite from Iger, Nelson.
PELTZ: OK.
EISEN: When he talked about you. Have a listen.
BOB IGER: I have not spoken to Mr. Peltz in a while. I have no plans to speak to him. I’ll leave it at that.
EISEN: Doesn’t sound like he’s really enthusiastic about speaking with you. Pretty dismissive. Why do you think they are fighting you so hard?
PELTZ: Well, look, you know, I’ve been around this track a few times. What’s interesting here is that Bob and I, every time I was in L.A., would have breakfast or lunch together, going back. And in New York, he would come to my office for lunch once or twice. So we chatted, OK? And we were friends. That’s why he invited me to address his board. Why would he address — ask me to address his board and give me the five subjects he wanted me to discuss if he felt that way about me? Look, this is about ego. And ego doesn’t have any place in the board room. And the directors who — they love Bob. Whatever Bob wants them to do, they do. As I said, they have paid Bob $1 billion in compensation since he’s been there. $1 billion, OK? And we have underperformed the S&P for the entire time Bob has been there. And we’ve underperformed the S&P from the day every director got on board. Think about that. Every director who got on board from the day they showed up until the day we showed up, they underperformed the S&P. I think it’s time. I think it’s time to get some sanity into the boardroom, to get an ownership mentality in the boardroom, and that’s very important. This board owns no stock. Bob owns no stock. And when I mean no stock, I mean no stock. Under $15 million. Each. OK? We have over $3 billion that’s been bought and paid for, not funny money, not options, not all that nonsense. Plain old common stock. OK? We really have a dog in this hunt. And that’s why the shareholders should be voting for us because they have a dog in this hunt, and they have been part, as we have been, part of the great unwashed. We haven’t made any money versus the S&P while the board has gotten fees, they’ve got squired around on private jets to visit the parks wherever they want. Blind breakers, all of that other stuff. As I told the — think about it. I went to the park in January, as plain old John Q. Public. I stood on lines. I stayed in the hotel. I got a normal room. No suite. Nobody ushered me around. And I saw the park the right way. I don’t think any of those people have been to the parks the way I went to the park. I don’t think they have really any understanding of what reality is.
EISEN: You have a — as we speak, releasing a new fight letter and on top is a new cartoon that is not the most flattering picture of the board. I think we have a graphic of the cartoon. It’s at the board table and they’re throwing spaghetti at the wall, which I think makes pretty clear, Nelson, how you feel about the latest quarter.
PELTZ: Well, they are throwing spaghetti — that’s what Bob said when he announced the quarter, and he was raving about the results of the quarter. The results of this quarter are lower than what they projected a year ago for this quarter. Then they lowered guidance and they beat the new lowered guidance. Think about that. I mean, there’s no cause for celebration here. If these shareholders want to, that’s great. I think the shareholders are celebrating the fact that we’re here because look how much the stock moved up when we showed up, and look how much it showed up — it went up last year. It went up to 118. And then they announced that we were going to take Bob’s word for it, and he was on the road to recovery. He was going to do everything we wanted him to do, except give me a board seat. And I said, fine. We’ll leave the stage. And we left. And what happened?
EISEN: The stock went down.
PELTZ: That 118 stock price went down to 79.
EISEN: So, a few questions here on where you go. When does your white paper come out and what happens if you lose on April 3rd? Do you sell?
PELTZ: Oh, come on. We’re not going to lose, OK. Let’s get that straight. I mean, the people who own this stock, they want action. They don’t want promises, OK? That’s not what they want. We’re going to win, we never — we never plan and state what we’re going to do if we lose because we don’t lose. But there was one proxy fight in all of them that we had that we lost. That was DuPont.
EISEN: DuPont, yes.
PELTZ: And you know what happened? We stuck around for two quarters and the chairman CEO took early retirement because all the promises she made prior to the vote never came to pass. So we hung around, and then we got a great new CEO who we could work with, and we did work with them, and you know what happened? DuPont merged with Dow and broke up into three companies, and that merger was negotiated right here at my house. The gates were locked so no investment bankers were allowed on the premises and we got the deal done in one day. And everybody celebrated that.
EISEN: Yes —
PELTZ: And that’s what happened when we didn’t win, OK, but when we did win, Sara, and you were there, was P&G.
EISEN: Yes, P&G. You waited six weeks for the recap.
EISEN: OK. We brought that — and then we had to wait for another six weeks to get our board seat. But it made no difference because that stock went from the 70s, where it had been around for 10 years, up to 160 when I got off the board. That’s my track record. But besides the stock price, sales went up, market shares went up, and margins went up, OK? And none of this bologna promises, throwing all that spaghetti against the wall. I mean, think of all the stuff they said they’re going to do. All because we’re here. If we weren’t here, do you think you would have heard about Taylor Swift getting all that money? Do you think we would have heard about this third — and second and third ESPN offering? Do you think we would have heard about $1.5 billion invested in Epic Games with no understanding of timing, earnings, what’s going to happen? Just $1.5 billion — let me get it out the door before earnings so I can announce it. Election day versus State of the Union.
EISEN: Well, they would say yes.
PELTZ: They would say yes to what?
EISEN: They would say he’s got a — well, he has that. That those are all strategic efforts. The cost cutting that he announced was real. He’s got a reputation and a legacy in media and entertainment and he’s trying to move the company forward into places like Epic, which is growing, you know, among key demographics in an amazing way.
PELTZ: Sara, right after that announcement, you had the CFO have a meeting with the press, and with shareholders, and was asked if he could explain the returns on some of these deals. He could not. He couldn’t tell you the returns on Epic. He couldn’t tell you the timing. This is the CFO. This is not some analyst. This is the guy inside, the number two guy in this company, according to the board, who’s recommending these things to the board. He couldn’t give you that information. I find that pretty stunning.
EISEN: Well, Nelson, we will continue to follow the saga and the fight. Do you know when you’re going to release the white paper?
PELTZ: I do know when we’re going to release the white paper. It will probably be in a couple of weeks.
EISEN: OK.
PELTZ: Everybody better sit down with a nice, warm glass of milk, get comfortable, because you’re going to see chapter and verse on Disney.
EISEN: OK.
PELTZ: Sara, thanks for having me this morning really.
EISEN: Looking forward to that analysis. Yes — no, thank you for coming on and stating the case.
PELTZ: OK.
EISEN: And responding to earnings and the stock price, which is lower.
PELTZ: Vote blue.
EISEN: Nelson Peltz.
PELTZ: Vote blue. That blue card. Go — go, guys. Thank you.
EISEN: All right, thank you, Nelson of Trian.
