Roy Disney’s Bid to Oust Eisner Is Reinvigorated

The fight to unseat Michael Eisner as Walt Disney Co.’s chief executive took on new life Thursday with the unraveling of the company’s successful relationship with Pixar Animation Studios.

For weeks, Eisner appeared to have the upper hand over adversaries Roy E. Disney and Stanley P. Gold, former board members who were portrayed by the embattled chief executive and his allies as disgruntled gadflies. Disney executives have been quietly making their case on Wall Street, citing the company’s rising stock price and an upcoming strong earnings report as evidence that Eisner has turned things around.

But Thursday’s shocker is being viewed as a boost to the campaign by Roy Disney, the nephew of company namesake Walt Disney, and Gold. The two operate through Shamrock Holdings in Burbank.

“This will give Roy Disney and others some more ammunition, which is something they desperately seem to need,” said investor Herbert Denton, president of Providence Capital Inc. in New York.

After a 13-year relationship, Pixar on Thursday announced it was terminating contract talks with Disney and would look for another studio to distribute its animated movies. Some analysts, though, think Pixar’s rejection may be best for Disney because it would have to give up so much profit under Pixar’s final offer.

The breakup nonetheless plays into one of Shamrock’s key arguments: that Eisner has mishandled creative relationships with such key figures as Pixar Chairman Steve Jobs and Miramax co-Chairman Harvey Weinstein.

Former board members Disney and Gold, who resigned late last year while calling for Eisner to step down, pounced on the demise of the Pixar-Disney partnership. They said it bolstered their contention that Eisner’s actions ultimately would hurt future earnings even if today’s profit is healthy.

“This just proves, sadly, that we were right,” Roy Disney said in an interview.

The company had no comment on Roy Disney’s remarks.

Earlier this week, Disney and Gold called on stockholders to vote against the reelection of Eisner and three other directors. The dissidents are expected to try to exploit the company’s disclosure this week that Eisner received a $6.25-million stock bonus in a year when Disney’s theme parks and ABC network continued to struggle.

In a statement Thursday, Disney and Gold said they had warned Disney directors as long as a year ago that the relationship with Pixar was fragile, even after the animation firm “hit five grand slam home runs in five times at bat for Disney.”

The Pixar animated hits released by Disney include “Toy Story,” “A Bug’s Life,” “Toy Story 2,” “Monsters, Inc.” and last year’s box-office champion, “Finding Nemo.” In recent years, Pixar’s pictures have outperformed Disney’s own animated films, once the driving force behind the company’s earnings.

“Our point is that if he had cultivated this relationship for the past five years you would never have gotten to where you are now,” Roy Disney said. “This is bad long-term management.”

Analysts said they had hoped Disney and Pixar would work out a deal, and added that Disney needed to explain why it let the animation company walk.

Investors reacted by battering Disney stock in after-hours trading; shares fell to $23.22 after closing up 78 cents at $24.45 on the New York Stock Exchange.

Jeffrey Logsdon, analyst with Harris Nesbitt Gerard, compared Eisner’s dilemma to that of a team owner whose star athlete becomes a free agent and ups his salary demands.

“You can say you let them get away,” Logsdon said. “But the other side is what would you have given up? The deal did not make economic sense.”

Times staff writer Meg James contributed to this report.