Disney’s share price rose nearly 2% early Monday after CNBC reported that Daniel Loeb’s Third Point had acquired a new stake in the entertainment giant — as the activist investor presses for changes, like spinning off ESPN into a standalone company and acquiring Comcast’s minority stake in the Hulu streaming service.
“We believe that it would even be prudent for Disney to pay a modest premium to accelerate the integration,” Loeb wrote in a letter to its investors obtained by CNBC. “We know this is a priority for you and hope there is a deal to be had before Comcast is contractually obligated to do so in about 18 months.” He did not disclose the size of Third Point’s position in the entertainment giant.
Disney is coming off a strong fiscal quarter in which its total direct-to-consumer footprint surpassed 221 million subscribers. Revenue also surpassed expectations thanks to strong demand for theme parks in the United States.
Yet in a recent letter to Disney CEO Bob Chapek, Loeb pushed for changes such as a focus on making “every attempt” to acquire Comcast’s minority stake in Hulu prior the upcoming deadline in 2024.
Disney holds a 67% stake in Hulu, while Comcast holds 33%. Disney has agreed to buy out Comcast’s share of the streamer for a minimum of $5.8 billion by January 2024 if it hangs on to the streamer. Acquiring full ownership would enable Disney to fold Hulu into its Disney+ streaming service domestically.
One long-standing source of speculation concerning Disney’s core businesses has been sports cable network ESPN. Despite an exodus of linear customers in recent years, streaming service ESPN+ remains a key element of the Disney Bundle (Disney+, ESPN+, Hulu). In Loeb’s letter, he raises the possibility of spinning off the company into its own standalone business.
“ESPN would have greater flexibility to pursue business initiatives that may be more difficult as part of Disney, such as sports betting,” Loeb wrote. “We believe that most arrangements between the two companies can be replicated contractually, in the way eBay spun PayPal while continuing to utilize the product to process payments.”
Loeb previously held a stake in the company from 2020 to early 2022.
In response to Third Point’s letter, Disney has released the following statement:
“We welcome the views of all our investors. As our third quarter results demonstrate, The Walt Disney Company continues to deliver strong financial results powered by world-class storytelling and our unique and highly valuable content creation and distribution ecosystem. Under the leadership of Bob Chapek, the company has delivered this strong performance while navigating the COVID-19 pandemic and its aftermath, including record streaming subscriptions and the reopening of our parks, where we have seen strong revenue and profit growth in our domestic parks business.
“Our independent and experienced Board has significant expertise in branded, consumer-facing and technology businesses as well as talent-driven enterprises. The Board has also benefited from continuous refreshment with an average tenure of four years.”
