While the exact size of the stake is unclear and it could not be learned what specific changes ValueAct may be pushing for, sources said, — Bloomberg
LOS ANGELES: ValueAct Capital has built a large stake in Walt Disney and sees room for the media and entertainment giant’s stock price to roughly double, people familiar with the investment firm’s thinking say.
San Francisco-based ValueAct, well known for working collaboratively with target companies, has known the Disney team for more than a decade and has been in contact with management as it built its stake over the last months, said the sources, who were not permitted to discuss the firm’s views publicly.
News of ValueAct’s stake in Disney was first reported by 13D Monitor.
While the exact size of the stake is unclear and it could not be learned what specific changes ValueAct may be pushing for, the people said, ValueAct believes the home of Mickey Mouse can flex its muscles anew.
For Disney chief executive Bob Iger, who returned from retirement last year and has spent much of this year overhauling the business and grappling with demands from activist investor Trian Fund Management, ValueAct’s new stake may become a silver lining, investors, lawyers and industry analysts said.
ValueAct, often invited onto boards without publicly pushing for seats, could become a preferred director candidate for Iger to install, providing counsel on overhauling the business and quieting a chorus of investor voices suggesting one of their own should help govern Disney, the sources said.
Disney’s board, which extended Iger’s contract through 2026, also is developing succession plans, sources said.
The investment firm has signalled it is supportive of management and optimistic about Disney’s future and told people the company’s stock price could trade between US$120 and US$190 a share, far above its US$93.93 closing price on Wednesday, the people said.
Like other major media companies, Disney is facing declining television ad revenue, a movie box office that has yet to return to pre-pandemic levels, and a streaming business that has yet to turn a profit.
Iger has told investors the company is evaluating options for dealing with those challenges, including whether to sell its television business. It is also actively seeking partners in its ESPN division, though Disney plans to retain ownership of its sports brand.
Investors view Disney as well-positioned in terms of streaming subscriber growth, and its content library – anchored by such recognisable entertainment brands as Pixar Animation Studios, Star Wars and Marvel, the people said. Its theme parks earn billions of US dollars of additional revenue from its familiar characters and stories, the sources said.
In some respects, ValueAct’s position in Disney created fresh drama at a time when the company, valued at US$167 billion, is already facing a new battle with Nelson Peltz’s Trian.
Peltz said in a regulatory filing on Tuesday that Trian increased its stake in common shares by more than 400% to own 32.9 million shares, worth roughly US$2.7bil, at the end of the third quarter. That stake is far bigger than those held by hedge funds Coatue Management, Adage Capital Partners and DE Shaw which each own stakes worth more than US$100mil.
Last month, Peltz, 81, signalled he planned to nominate several directors to the board when the nomination window opens in a few weeks. This week two sources familiar with Peltz’s thinking said he will likely nominate between three and four directors. – Reuters
