Justin Solomon | CNBC
Activist investor Dan Loeb has indicated that he is going to back down from his efforts to get Disney to spin off ESPN, reversing a position he advocated less than a month ago.
In a tweet Sunday morning, Third Point’s CEO said he sees virtue in keeping the sports network as a separate vertical within the Disney conglomerate.
“We better understand the potential of @espn as a standalone business and another vertical for $DIS to reach a global audience and generate advertising and subscriber revenue,” Loeb said.
“We look forward to seeing Mr. Pitar execute plans for growth and innovation, generating significant synergies as part of The Walt Disney Company,” he added, referring to Disney chairman James Pitar.
The tweet follows comments from Disney CEO Bob Chapek, who told reporters at the weekend’s D23 Expo that he has big plans for ESPN, though he did not release specifics. Chapek told Variety that “we had no less than 100 inquiries from people wanting to buy” ESPN when word got out that it was potentially for sale.
“What does that tell you? It says we have something really good,” he said. “And if you have a strategic plan, a vision of where it fits into the company over the next 100 years, then you don’t want to get rid of that completely. And we have that plan. We didn’t share that plan.” .”
The turnaround in Loeb’s position comes after he took a new stake in Disney worth about $1 billion, or 0.4% of the company, in the second quarter. Disney shares have gained 6.5% over the past month. Loeb moved out of an earlier position at the company when the stock fell as interest rates soared.
At the heart of his push to spin off ESPN was the belief that the new business could expand into areas including sports betting. He compared it to eBay spinoff of PayPal “while continuing to use the product to process payments.”
Along with the ESPN issue, Loeb urged Disney to bring streaming giant Hulu directly to the Disney+ direct-to-consumer platform. NBC Universal parent Comcast has an agreement to sell its 33% stake in Hulu to Disney within two years. Loeb recommended that Disney “make every attempt” to acquire the remaining minority stake before the sale deadline.
“We believe it would even be reasonable for Disney to pay a modest premium to expedite the integration,” Loeb said in the letter. “We know this is a priority for you and we hope to have a deal done before Comcast is contractually obligated to do so in approximately 18 months.”
CNBC has reached out to Disney for comment.
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