But Third Point still wants some changes – five, to be exact. Loeb said they will “unlock more value in the short term.”
“Incorporating Hulu directly into the Disney+… platform will deliver significant cost and revenue synergies, ultimately re-igniting growth in the domestic market,” wrote Loeb, adding that “even would be sensible if Disney paid a modest premium to accelerate integration.”
In another of the five steps, Third Point suggested that “a strong argument can be made that the ESPN business should be transferred to appropriately indebted shareholders” in order to reduce Disney’s overall debt.
Loeb admitted that the sports network is an attractive aspect of the broader streaming bundle with Disney+ and Hulu. But he thinks there are other reasons for separating ESPN from Disney, including the rapid growth of sports betting.
“ESPN would have more flexibility to pursue business initiatives that might be more difficult as part of Disney, such as sports betting,” Loeb wrote. “ESPN and sports league customers would be better served by a focused management team that occupies a leadership position in sports distribution.”
Answering the question about sports betting during last week’s earnings call, Disney CEO Chapek said the company hopes to “announce something in terms of a partnership in the future.”
Loeb also wants Disney to cut costs and suspend its dividend payments to shareholders to save more money for share buybacks, debt reduction and additional investment in the company. He also urged Chapek to consider adding new board members.
Third Point wants to “work directly and constructively” with Disney, Loeb wrote, adding that the company “will likely require additional strategic, capital allocation and governance changes to ensure its success.” He acknowledged that “some of our suggestions are already in the works.”
Disney said in a statement that “we welcome the views of all our investors” and that the company “continues to deliver strong financial results.”
The company added that Chapek’s leadership has led to “this strong performance while navigating the COVID-19 pandemic and its aftermath”, and that the “independent and experienced board of directors has significant expertise in brand, consumer-oriented and technology companies”.
