Third Point re-invests in Disney, pushes for changes including ESPN spinoff

By Svea Herbst-Bayliss and Dawn Chmielewski

(Reuters) -Hedge fund Third Point on Monday unveiled a new position in Walt Disney (NYSE:DIS) Co and made a string of suggestions, ranging from spinning off cable sports channel ESPN to share buybacks to new board members, to improve the company's fortunes.

Billionaire investor Daniel Loeb, who runs Third Point, made a U-turn on Disney by buying a stake in the second quarter not long after he liquidated the firm's position in Disney during the first quarter.

"Our confidence in Disney’s current trajectory is

such that we have, in recent weeks, repurchased a significant stake in the Company," Loeb wrote to Disney CEO Robert Chapek in a letter seen by Reuters.

Still, Loeb laid out a list of changes he feels should be pursued in order to improve the company's fortunes.

Striking a conciliatory tone, Loeb wrote that some changes might already be in the works but noted that Disney should cut costs, pay down debt and buy back shares.

His biggest suggestions involve ESPN, which he thinks should be spun off to shareholders. He urged Disney to hire bankers and lawyers to "reassess the desirability of the transaction in the current environment" after Disney had already considered it.

One industry trade publication, Puck, reported last year that Disney had considered spinning off ESPN as the network lost cable subscribers. The same publication reported last month that this option was no longer under consideration, and that live sports is considered a "linchpin" of the company's business.

Loeb also proposes that Disney accelerate the timetable for buying the remaining stake in Hulu from minority stakeholder Comcast Corp (NASDAQ:CMCSA) ahead of the planned 2024 acquisition. This would clear the way for Hulu to be integrated into the Disney+ technology platform and save money.

The activist investor also criticized the company's board, saying there are "gaps in talent and experience as a group that must be addressed" and added that Third Point has identified potential directors.

Disney was not immediately available for comment.

Disney's stock, which has fallen roughly 21% since January, climbed 2% on Monday the news that Loeb, who has pushed for changes at companies ranging from food company Nestle SA (SIX:NESN) to healthcare company Baxter International Inc (NYSE:BAX), has become involved.