: Third Point discloses Disney stake, recommends ESPN spinoff

by | Aug 15, 2022 | Stock Market

Shares of Walt Disney Co. were rising in Monday morning trading after Third Point LLC Chief Executive Daniel Loeb disclosed that he has “repurchased a significant stake” in the company and would seek to work with the media giant’s management team in pursuit of strategic changes. In a letter to Disney’s
management, Loeb recommended cost cuts, a continued suspension of the company’s dividend, strong efforts to acquire Comcast Corp.’s
minority stake in Hulu, a potential spinoff of the ESPN business, and an “introduction” to new board members who could fill current “gaps in talent and experience.”

Loeb said in his letter that Disney’s latest quarter showed that the company’s “complex transformation is succeeding,” though he said that Disney “will likely require additional strategic, capital allocation, and governance changes to ensure its success.” Read: Disney earnings suggest the ‘streaming wars’ are officially over In proposing cost cuts, he argued that the company’s “costs are among the highest in the industry,” causing Disney to “significantly [underearn] relative to its potential.” He wants the company to consider expense cuts that could help improve margins and dispose of “excess underperforming assets.” Disney stopped dividend payouts in 2020 as the onset of COVID-19 disrupted its parks business, and Loeb is urging the company to continue that suspension while using its free-cash flow to buy back shares, pay back debt or invest in organic growth. He also recommended that the company “make every attempt to acquire Comcast’s remaining minority stake [in Hulu] prior to the contractual deadline in early 2024.” Such a move could provide various benefits to Disney’s streaming business through “significant cost and revenue synergies” that could once again jumpstart domestic growth. See also: Disney+ and Hulu prices are changing — here’s how much your streaming plan will soon cost “We believe that it would even be prudent for Disney to pay a modest premium to accelerate the integration but are cognizant that the seller may have an unreasonable price expectation at this time (while noting the seller has already made the decision to prematurely remove their own content from the platform),” Loeb wrote. “We know this is a priority for you and hope there is a deal to be had before Comcast …

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