Svea Herbst-Bayliss and Don Chmielewski
NEW YORK (Reuters) – Blackwells Capital increases pressure on Walt Disney (NYSE:) in a long-running boardroom battle, suing the entertainment giant Thursday over information that may indicate possible disclosure violations in its dealings with hedge fund ValueAct Capital.
The lawsuit, filed in Delaware court, is the latest chapter in a fight over who will sit on Disney’s board of directors and help the House of Mickey Mouse make business and personnel decisions.
Disney called the claims “baseless” and said the suit was a “desperate attempt to draw attention to its slate of director candidates.”
Blackwells and another hedge fund, Trian Fund Management, are trying to convince investors to elect their director nominees, while Disney is backing its own directors at its annual shareholder meeting next week.
At the heart of Blackwells’ lawsuit is the relationship between the entertainment company and ValueAct Capital, as well as the information-sharing agreement they signed earlier this year. The suit says Blackwells wants to examine its books and records to “investigate serious allegations of wrongdoing relating to Disney’s transactions and disclosures related to ValueAct.”
Disney withdrew all of the money it had invested in ValueAct, and the firm no longer managed the company’s money when ValueAct acquired its stake in Disney last year, a person familiar with ValueAct’s business told Reuters earlier this month.
Earlier this month, the company’s chief investment officer and co-CEO Mason Morfitt supported the re-election of Disney CEO Bob Iger and the entire Disney board of directors against two hedge fund rivals.
Advisory firm ISS, which often manages investor voting, wrote last week: “ValueAct also indicated that while its investment team met with Bob Iger very rarely in the years leading up to the Disney investment, Mason Morfitt and Bob Iger did not have a personal relationship.” .
Disney said Thursday that “no Disney Retirement Plan Funds are currently investing in ValueAct or managing any Disney Retirement Plan Funds at the time of the Company’s information sharing agreement.” Disney said it offered to meet with Blackwells “to provide documentation to support these facts, but Blackwells declined the meeting.”
A Blackwells spokesperson said: “Shareholders are entitled to full disclosure of the relationship with ValueAct, including, without limitation, all royalties received by Disney during the 10-year period preceding ValueAct’s Board approval.”