Third Point discloses stake of nearly $1 billion in Disney, pushes for changes

By Svea Herbst-Bayliss and Daybreak Chmielewski

(Reuters) – Hedge fund Third Level on Monday disclosed a stake of roughly $1 billion in Walt Disney Co and mentioned it plans to push the media firm to make a string of adjustments, from spinning off cable sports activities channel ESPN to purchasing again shares and including new board members.

Billionaire investor Daniel Loeb, who runs Third Level, made a U-turn on Disney when he constructed a brand new stake within the second quarter, not lengthy after exiting his place months earlier when fears about rising costs and sooner rate of interest hikes sparked a pointy market selloff.

Now Third Level, proudly owning roughly 0.4% of the corporate recognized for its theme parks and flicks like “Aladdin” and “Frozen,” is again with reward for the corporate’s CEO, Robert Chapek, and a listing of initiatives he and the board ought to pursue to spice up progress.

“Our confidence in Disney’s present trajectory is

such that we’ve got, in latest weeks, repurchased a major stake within the Firm,” Loeb wrote to Chapek in a letter seen by Reuters. Loeb wrote after Disney mentioned quarterly revenue jumped 50% and its streaming subscriptions overtook Netflix’s.

Chapek has weathered criticism in Hollywood over a 2021 dispute with Scarlett Johansson, the star of the Marvel movie “Black Widow,” and a political storm over the corporate’s response to a brand new schooling legislation in Florida, the place the corporate employs some 80,000 folks.

Disney initially stored quiet concerning the measure, which limits classroom dialogue of gender identification and sexual orientation, prompting criticism from that neighborhood and a few workers. It later condemned the legislation, inflicting Florida Governor Ron DeSantis to rail towards “Woke Disney.”

Loeb wrote that administration could already be contemplating the adjustments he proposed, together with price cuts, paying down debt and shopping for again shares.

He mentioned Disney’s board must be refreshed, discovering “gaps in expertise and expertise as a gaggle that have to be addressed.” Loeb mentioned he has recognized potential administrators however declined to elaborate.

Disney mentioned in an announcement it welcomes “the views of all our buyers.” It famous the corporate’s income and revenue progress underneath Chapek’s management, including that its board “has vital experience in branded, consumer-facing and know-how companies.”

Activist buyers typically push their agendas by making an attempt to win board seats both by an invite from the corporate or by rallying different buyers to again the administrators in a vote.

A significant suggestion by Loeb includes ESPN, which he thinks needs to be spun off to shareholders. He urged Disney to rent bankers and attorneys to “reassess the desirability of the transaction within the present atmosphere” after Disney had already thought of it.

One trade commerce publication, Puck, reported final yr that Disney had thought of spinning off ESPN because the community misplaced cable subscribers. The identical publication reported final month that this selection was not into consideration, and that stay sports activities is taken into account a “linchpin” of the corporate’s enterprise.

Loeb additionally proposed that Disney speed up the timetable for getting the remaining stake in Hulu from minority stakeholder Comcast Corp forward of the deliberate 2024 acquisition. This is able to clear the best way for Hulu to be built-in into the Disney+ know-how platform and get monetary savings.

Disney’s inventory, which has fallen roughly 21% since January, was up 2.2% at $124.21 on Monday afternoon. Loeb has beforehand pushed for adjustments at firms starting from Nestle SA to healthcare firm Baxter Worldwide Inc.

Like different outstanding hedge fund managers, Loeb has weathered double-digit losses this yr and tried to restrict the injury by promoting out of practically all know-how names earlier within the yr, sources mentioned. Third Level purchased again in to Disney at a decrease stage than when it first invested in 2020.

(Reporting by Svea Herbst-Bayliss in Boston and Daybreak Chmielewski in Los Angeles; Enhancing by Mark Porter and Matthew Lewis)