Activist company

Disney shares jump as company seeks to boost growth with Bob Iger return

A Disney store in New York on December 5, 2019.NICHOLAS PFOSI/Reuters

Bob Iger returns to Walt Disney Co DIS-N as chief executive less than a year after retiring, a surprise return that coincides with the entertainment company’s bid to bolster investor confidence and earnings for its technology unit. streaming.

Iger, 71, who served as chief executive for 15 years and retired as chairman last year, has agreed to serve as CEO for two years effective immediately, Disney said in a statement Sunday. evening. He will replace Bob Chapek, who took over as Disney CEO in February 2020 just as the COVID-19 pandemic hit, driving park closures and restrictions on visitors around the world.

Shares of Disney jumped more than 9% in premarket trading in the United States, valuing the company at around $182 billion. The Frankfurt-listed stock jumped as much as 10% in European trading on Monday, its best day in nearly two years.

“Maybe the old hand on the bar is what’s needed,” analyst Neil Wilson said as the company spends billions to compete with rival Netflix and seeks to revive the price. of his action.

The stock has fallen more than 40% so far this year, trailing the nearly 7% year-to-date decline of the broader Dow Jones Industrial Average index. It lost almost a third of its value while Chapek was at the helm.

“The Board of Directors has concluded that as Disney enters an increasingly complex period of industry transformation, Bob Iger is uniquely positioned to lead the company through this pivotal time,” said President Susan. Arnold in the release.

Disney disappointed investors this month with an earnings report that showed mounting losses in its streaming unit that includes Disney+. Shares hit their lowest level in 20 years the day after the fourth quarter results.

The streaming business lost nearly $1.5 billion in the quarter, more than double the year-ago loss, eclipsing subscriber gains. The unit, which competes with Netflix Inc among others, has yet to make a profit since launching in 2019. Disney said it expects Disney+ to become profitable in the fiscal year. 2024.

“I’m an optimist, and if I’ve learned one thing from my years at Disney, it’s that even in the face of uncertainty – perhaps especially in the face of uncertainty – our employees and our Cast Members realize the impossible,” Iger said in a memo to employees seen by Reuters.

Some activist investors have mounted the pressure on Disney this year, including Third Point, led by billionaire Daniel Loeb.

In August, Loeb began pushing for changes, including splitting off sports television network ESPN and accelerating the planned takeover of Hulu by minority owner Comcast Corp. The investor later tweeted that he better understood ESPN’s value to Disney.

In the days following its lackluster earnings report, Trian Fund Management LP, co-founded by Nelson Peltz, earlier this month bought more than $800 million worth of Disney stock, according to a WSJ report on Monday. citing people familiar with the matter.

Trian’s view is that Iger should not regain control of the company, he said.

The stake, which is below the 5% disclosure threshold, is not as large as Trian would like and will likely increase depending on market conditions.

The fund is also seeking a seat on Disney’s board as it pushes the entertainment giant to make operational improvements and cut costs, according to the report.

Disney did not respond to a request for comment on Trian.

Iger left Disney on a high note as the company waged battle against Netflix in the streaming wars. During his tenure, Disney made several key acquisitions, including Pixar Animation Studios, Marvel Entertainment and 21st Century Fox, and quintupled its market capitalization.

During his first term, Disney’s annualized shareholder returns were more than 14%, well above rival Comcast and the broader stock market.

During this second round, Iger was tasked with “putting Disney on a path for renewed growth” and working with the board to identify a successor, the company said.

The management change surprised employees, two company sources said.

Shortly after Iger’s return was announced, Netflix co-founder Reed Hastings tweeted, “Ugh. I had hoped Iger would run for president. He’s awesome.”