Third Point announced Monday that it had purchased a new stake in Disney after selling one earlier this year. Third Point CEO Daniel Loeb stated in a letter to Disney CEO Bob Chapek that he believes “Disney’s complex transition is succeeding” and has “confidence in Disney’s current trajectory.”
However, this activist investor still requests five changes in Disney, which Loeb stated that will “unlock further value in the near-term.”
Disney should explore buying back its minority investment in streaming competitor Hulu from Comcast (CMCSA), a move Disney is required to execute by early 2024 per its contract. Comcast already had plans to transfer some of its material from Hulu to its own Peacock service.
“Integrating Hulu directly into the Disney+… platform will provide significant cost and revenue synergies, ultimately reigniting growth in the domestic market,” Loeb wrote, adding that “it would even be prudent for Disney to pay a modest premium to accelerate the integration.”
Third Point advised, as one of the five steps, that the ESPN company should be spun off to shareholders with a suitable debt burden in order to lower Disney’s overall debt.
“ESPN would have greater flexibility to pursue business initiatives that may be more difficult as part of Disney, such as sports betting,” Loeb wrote. “Customers of ESPN and sports leagues would be better served by a focused management team driving a leadership position in sports distribution.”
Loeb also wants Disney to reduce expenses and defer dividend payments to shareholders in order to retain more cash for stock repurchases, debt reduction, and more business investments. Additionally, he encouraged Chapek to consider refreshing the board.
“We believe there are gaps in talent and experience as a group that must be addressed. Third Point has identified potential board members who we believe would make essential contributions to the Company’s Board at this critical time.”
