Could Bob Iger Sell Disney?
In April, I wrote about the Disney rumor that won’t die.
Some Wall Street analysts remain devout in the belief that Apple will eventually swallow The Walt Disney Company, much as Disney did with Fox.
During Disney’s latest earnings call, a Wall Street expert even challenged Iger on the point.
As I said at the time, Iger’s answer wasn’t exactly a no. So, it’s time to ask the question.
Could Bob Iger sell Disney? Let’s evaluate the possibility.
What Iger Has Said
Let’s start with a brief acknowledgment of what’s happening here.
Disney’s CEO appeared on CNBC early in the morning on a recent date and did the unthinkable.
Iger basically announced a fire sale for Disney content, especially anything relating to Linear Networks.
That’s significant because Linear Networks anchored Disney’s growth for a quarter-century.
Now, the person in charge of the company bluntly describes these entities as “no-growth businesses.”
Once Iger used those terms, people started to wonder whether he might really sell everything at Disney rather than taking a piecemeal approach.
When asked about the topic, here are Iger’s comments:
“I just am not going to speculate about the potential for Disney to be acquired by any company, whether a technology company or not.
“Obviously, anyone who wants to speculate about these things would have to immediately consider the global regulatory environment.
“I’ll say no more than that. It’s just — it’s not something that we obsess about.”
The person asking the question had referenced a “larger technology company,” with the implication of Apple.
However, other businesses like Amazon, Google, and Meta/Facebook could feasibly get involved as well.
Should Disney place its entire business operation up for sale, countless entities would at least explore the option of buying.
That’s not the question, though. What matters is whether Iger would sell Disney.
What Iger Is Doing
Here’s part of the reason why this topic has become top-of-mind lately.
Iger didn’t merely announce the exploration of selling some assets.
Disney’s CEO also brought back two of his previous lieutenants, Thomas Staggs and Kevin Mayer, to advise him on negotiations for these assets.
Those two former top Disney executives have since founded their own successful company, Candle Media.
This knowledge caused at least one clever reporter to connect some different dots. Financial analysts know that Blackstone funds Candle Media.
Could Blackstone buy Disney instead? While I hadn’t written about it, I’ll admit it was my first thought when Mayer and Staggs returned to Disney as temps.
Still, I don’t think that’s the strategy here. Instead, I believe Iger’s decision to bring back his former trusted advisors says more about the new regime.
Iger either doesn’t know or doesn’t trust many of the people former CEO Bob Chapek had promoted.
More accurately, Iger may lack confidence in their skills with mergers and acquisitions (M&A), which was Kevin Mayer’s bread and butter.
Mayer and Staggs are extraordinarily well-connected and can find suitors for any Disney holding that Iger no longer wants.
What we’re watching is Iger getting the band back together again long enough to strip Linear Networks for parts.
Specifically, Disney has done more than explore selling its conventional television broadcasting assets. It has also evaluated potential spinoffs.
If Iger took that approach, he could spin off Linear Networks into a new entity that would gradually wither and die.
Learning from Sinclair’s Mistakes
I realize that strategy sounds harsh, but it happens in the corporate world.
As a recent example, Sinclair Broadcast Group infamously guessed wrong on the value of regional sports networks (RSNs).
Sinclair purchased the rights to these assets from Disney, who had to divest itself of RSNs to meet regulatory requirements in the Fox deal.
I realize that’s a boring concept to some. Suffice to say that some countries that love soccer/futbol didn’t want Disney controlling the entire sport.
To satisfy these places, Disney sold the RSNs to Sinclair for what seemed like a bargain price of $10.6 billion.
In truth, Sinclair overpaid by about $9.6 billion. The company recognized this mistake quickly and desperately scrambled to fix the problem.
Sinclair created a spinoff entity, Diamond Sports Group, which is currently an absolute disaster.
This spinoff can’t pay its bills and is sure to go bankrupt soon, as it’s already in bankruptcy court and losing court rulings.
Sadly, that’s the future I can envision for Disney’s Linear Networks.
The Time Warner Scenario
Should Disney fail to find a buy for these assets, a Plan B would emerge.
In that scenario, Disney would spinoff some/all of its Linear Networks assets.
Simultaneously, Disney would load some of its current debt onto this new organization that’s technically standalone.
In the process, Iger would control the revenue of Linear Networks in the short term but retain the ability to disavow the product later.
Some of you may remember a similar scenario. Time Warner CEO Jeff Bewkes created a spinoff for its print publications in 2013.
An investment fund purchased that spinoff, Time Inc., four years later.
In between, Time Warner stuck Time Inc. with a $600 million bill for the transaction.
In other words, the larger Time paid itself $600 million to perform a spinoff.
Disney could adopt this approach with either its entire lineup of Linear Networks or a few specific ones.
This concept explains why some expect Disney to spin off ESPN as well, something I refuse to dismiss as a possibility.
Should Iger adopt this approach, the conversation grows fascinating and a bit worrisome.
As one business analyst recently described it, one or more major Disney spinoffs could lead to “the full-Bewkes.”
That’s an apt description for how Bewkes cleaned Time Warner’s ledger and then sold the entire company for $85.4 million.
AT&T purchased those assets, which is the fate some envision for Disney.
Tech companies and cellphone carriers have a desperate need for content, and Disney remains the primary storytelling brand in the world.
Could Iger Sell Disney?
I just laid out a reasonable path to that very transaction.
Let’s say that Iger sells some smaller entities like National Geographic, FX Networks, and A&E Networks.
Now, let’s presume that Disney divests itself of ESPN in some way. Again, I don’t think that’s happening.
Still, I cannot ignore that Disney will start announcing ESPN’s profits separately. Here’s a direct quote from CNBC:
“Next quarter, Disney will begin to report ESPN’s finances separately from the rest of the company — another potential precursor to a separation.”
Since Iger values ESPN highly, I suspect Disney will maintain a connection no matter what.
Also, Iger just clearly stated that his company’s five-year plan hinges on streaming, theatrical releases, and theme parks.
Most businesses in the early stages of selling don’t come up with long-term plans.
I say that before we factor in the regulatory concerns, which would occur in other countries beyond the United States.
Remember why Disney sold the RSNs to Sinclair? Soccer-loving countries forced Disney’s hand there.
The thought of Disney upending any number of assets wouldn’t please many governments around the world.
So, I believe that Iger has no interest in selling Disney in the short term, and it’d be hard to do anyway.
As the end of his CEO tenure approaches in 2026, the conversation could change, though.
Stay tuned, folks. The next 36 months at Disney could get bumpy.
Feature Photo: Scott Mlyn | CNBC
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