Chapter 4: Henson’s Dilemma (Cont’d)
From Dis-War Two: The Great Disney Proxy Culture War of 1998, by Taylor Johnson
Jim Henson’s announced retirement plans hit the board like a tornado. Some were outraged, others subtly impressed. Henson recommended Roy Disney as his successor as Chairman and “face of the company” while recommending Diane Disney Miller as Vice Chair.
Almost immediately Disney Miller made a point of order that Henson didn’t get to make that decision himself. The Board of Directors had a say in the matter. They would all meet back the next day where the board would debate Henson’s offer to resign. Henson, she said, should take the day off and meet with his family.
On August 10th, Jim Henson and his children all took the day off and sailed to Catalina Island. Strangely, Henson was at peace. He’d accept either path. If they accepted his resignation, he’d retire to New Mexico and find and purchase that hilltop that so intrigued him. Perhaps he’d turn it into a puppetry retreat. If they rejected his offer, he’d stay and help them come to terms with the challenges of the Good Shepherd Group. Either way, that could wait, and he strove to stay in the moment and enjoy the ocean spray and beaches of Catalina and most of all the company of his family for the day.
Tomorrow could wait.
On August 11th, Jim Henson returned to the board. Acting Chairman Roy Disney announced the decision of the board: Jim Henson’s offer to step down for the Chair of the Disney Board of Directors was rejected on a unanimous vote, with Bob Wright of GE at first planning on abstaining, but convinced ultimately to support the vote since any sign of dissention would only embolden the Shepherds. A cheer went through the room, though GE’s near-abstention gave the moment an ominous undercurrent.
“Okay, then,” he said, taking up the Chair again, mind still abuzz. “Well then, Unfinished Business is The Shepherds, needless to say.”
The board agreed to continue the Stock Buyback while Henson, both sides of the Disney family, Apple, Lucasfilm, and Amblin agreed to support it with their own funds, buying stocks up directly. Marriott and Bass declared their support for Henson, but would not be participating in stock buys at this time. GE again declared their commitment to “the best interests of their shareholders,” which combined with the near-abstention amounted to a declaration of neutrality and intent to stay on the sidelines.
But this façade of unanimity in support belied major structural weaknesses in the coalition. GE was already entertaining back-channel discussions with Peltz, agreeing to “consider their options” at the table. Bass was under growing pressure from his family and the board to consider making common cause with Peltz, if only on issues “of direct interest to Bass Brothers.” And most alarmingly, representatives from Peltz had been talking with both sides of the Disney family, and making it apparent to each that they were entertaining offers from the other side in a strategy intended to fan the flames of distrust between the two sides.
In August a “deconfliction” lunch meeting between Stanley Gold and a Retlaw representative broke down when Gold, irritated at the tone of the Retlaw rep’s voice, pelted him with a maraschino cherry, causing the rep to storm out, his lunch left unfinished. Henson tried to organize a peacemaking meeting, but neither side was prepared to speak directly with the other after the incident.
Henson, at the Legal Weasel’s recommendation, tried to contact the Shepherds directly, but was ignored. He tried to call Turner directly, but got the runaround. There would be no side deals or background negotiations. After a brief talk with Roger Stone, whom he thenceforth referred to derogatorily as “The Penguin”, Henson came to understand that he was dealing with people who lived in a fundamentally different universe than he did, a hard thing for a man who believed in “One Human Family” to accept. He authorized some attempts to find and make deals with individual investors, though the opaque charter of the Good Shepherd Group kept most of them hidden.
As much as the “invasion” metaphor struck against his core pacifistic beliefs, he regretfully accepted that he, and indeed Roy’s whole “Dream” philosophy, were under siege.
By the middle of the month, The Shepherds had amassed over 7.5% of the shares and climbing. Turner appeared to be sitting on his now-5.2%. Disney had bought back some stock directly and Henson, the Disneys, Apple, Amblin, and Lucasfilm had all increased their personal stake. It seemed likely that The Shepherds and Turner would together accumulate a minimum 13% before the remaining circulating shares were claimed.
Even if all of the Knights Errant and GE sided with Turner and the Shepherds, there was no chance of an overt takeover unless one of the Disneys joined the Shepherds.
But the likelihood of an ugly and prolonged Proxy Battle with Henson in the middle loomed large.
Stocks at a Glance: Walt Disney Entertainment (DIS)
August 14th, 1998
Stock price: $107.72
Major Shareholders: Henson family (19.4%), Roy E. Disney family (12.9%), Disney-Miller family (12.9%), General Electric (10.6%), Bass Brothers (8.8%), Bill Marriott (5.8%), Amblin Entertainment (1.3%), Apple Comp. (0.7%), Lucasfilm Ltd. (0.7%), Suspected “Knights Errant” (4.9%), Shepherd Group (7.8%), Columbia Entertainment (5.2%), Other (8.3%; ~8% Institutional Investors)
Outstanding shares: 498.6 million