The future of Disney, Bob Iger gives signals to investors

From Culver City to New York, America’s media and entertainment powerhouses spin scenarios about the future and the possible dissolution of the most powerful conglomerate in the sector. Bob IgerCEO of walt disneya company to which he returned in November for a second term, sparked lively industry talk in mid-July when he suggested in an interview with CNBC that the company’s television businesses, including its stations and cable channels, “may not be critical to Disney”.

His comments sparked a flurry of activity among bankers and private equity firms, which began to weigh whether they should “make a move”, a banker who spoke on condition of anonymity told Reuters.

“It is giving signals to investors (…) It makes people start to think”said the banker.

Iger fueled the speculation last week, during Disney’s third-quarter earnings conference call with investors, when he said the company is evaluating strategic partnerships for its largest sports brand, ESPN, and had received “notable interest.” , although Disney planned to remain in control.

The three businesses that will drive the most growth over the next five years are movie studios, theme parks and video streaming.

One senior media executive envisioned Iger spinning off ABC, local television networks and Disney cable networks like the Disney Channel or FX as a separate company, saddled with an appropriate level of debt.

Another veteran media executive predicted that Disney will spin off the television assets to its shareholders as a separate publicly traded company in 2024, with a possible role for private equity.

A fourth media executive, who has run traditional and digital media companies, said Disney may need to attract outside investors to ESPN in order to competitively bid for increasingly expensive sports rights, such as expiring NBA games. after the 2024-25 season.

This would potentially free up cash for Disney acquire NBCUniversal’s stake in Hulu, assuming full ownership of the streaming service next year. Under a deal reached in 2019, NBCU parent Comcast can require Disney to buy the stake in Hulu, or Disney can require NBCUniversal to sell it, as early as January 2024, at a market value of at minus $5.8 billion.

Disney declined to comment.

Sale by parts

The fourth executive, along with other media executives who spoke to Reuters, said Iger is likely developing options, such as retaining ownership of ESPN with the intention of divesting it in the future to position Disney as a takeover target. more attractive.

The executive compared the strategy to one pursued by Jeff Bewkes, the former CEO of Time Warner, who divested parts of the media conglomerate’s business before selling its core TV and movie unit to AT&T in an $85.4 billion deal. which closed in 2018, the veteran executive said.

This could be Iger’s end game, these executives speculated. To make it attractive to the only potential buyers big enough to digest Disney – Apple or Alphabet’s Google – Iger would have to pare Disney down to the parties that preserve its global portfolio of intellectual property, while separating its legacy businesses generating of cash, like television.

“There is no way a FAANG company is going to buy your company when you have all these cable channels, a television network and a cable sports network,” the executive said, using an acronym for the top five tech companies in the United States. United: Facebook (now Meta), Apple, Amazon, Netflix and Google. “It’s not their business and the government is unlikely to allow it.”

Amazon, which acquired MGM for $8.5 billion last year, is likely not interested in such a deal, according to a source familiar with the matter. And Facebook is not believed to be interested in traditional media assets either.

Laura Martin, an analyst at Needham and Co, raised with investors the possibility of Apple acquiring Disney, writing in March that the combination of great content and strong distribution would create value. This idea continues to circulate in Hollywood.

“Obviously, anyone who wants to speculate on these things would have to immediately consider the global regulatory environment,” Iger said, when asked about the possibility during the investor call. “I won’t say more than that. It’s not something that obsesses us.”

With information from Reuters