Hedge fund Third Point on Monday unveiled a new position in Walt Disney and made a string of suggestions — including spinning off cable sports channel ESPN, sharing buybacks and naming new board members — to improve the company’s fortunes.

Billionaire investor Daniel Loeb, who runs Third Point, made a U-turn on Disney by buying a stake in the second quarter not long after he liquidated the firm’s position in Disney during the first quarter.

“Our confidence in Disney’s current trajectory is such that we have, in recent weeks, repurchased a significant stake in the Company,” Loeb wrote to Disney CEO Robert Chapek in a letter seen by Reuters.

Still, Loeb laid out a list of changes he feels should be pursued in order to improve the company’s fortunes.

Striking a conciliatory tone, Loeb wrote that some changes might already be in the works but noted that Disney should cut costs, pay down debt and buy back shares.

Daniel Loeb
Daniel Loeb bought a Disney stake in the second quarter after liquidating it in the first quarter.
REUTERS

His biggest suggestions involve ESPN, which he thinks should be spun off to shareholders. He urged Disney to hire bankers and lawyers to “reassess the desirability of the transaction in the current environment” after Disney had already considered it.

One industry trade publication, Puck, reported last year that Disney had considered spinning off ESPN as the network lost cable subscribers. The same publication reported last month that this option was no longer under consideration, and that live sports is considered a “linchpin” of the company’s business.

Loeb also proposes that Disney accelerate the timetable for buying the remaining stake in Hulu from minority stakeholder Comcast ahead of the planned 2024 acquisition. This would clear the way for Hulu to be integrated into the Disney+ technology platform and save money.

Loeb also suggested cost cuts in a letter to Disney's CEO.
Loeb also suggested cost cuts in a letter to Disney’s CEO.
LightRocket via Getty Images

The activist investor also criticized the company’s board, saying there are “gaps in talent and experience as a group that must be addressed” and added that Third Point has identified potential directors.

Disney said in a statement it welcomes “the views of all our investors.” It noted the company’s revenue and profit growth under Chapek’s leadership, adding that its board “has significant expertise in branded, consumer-facing and technology businesses.”

Disney’s stock, which has fallen roughly 21% since January, climbed 2% on Monday the news that Loeb, who has pushed for changes at companies ranging from food company Nestle SA  to healthcare company Baxter International , has become involved.



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