© Reuters.
Von Sam Boughedd
Investing.com – As the New York Post reported yesterday, Walt Disney (NYSE:) to spin off its “non-core assets” like ESPN and ABC to optimize profits.
The sale of the stations is on the table and is a real option to satisfy the desire of activist investor Nelson Peltz-led hedge fund Trian Partners for a higher share price, the newspaper reports.
Peltz is a longtime critic of CEO Bob Iger and holds a $940 million stake in Disney.
Following the report, the analysts of Wells Fargo (NYSE:) in a note to clients that they believe such a move by Disney “makes sense and adds value,” while investor feedback “indicates support for such a move.”
“Recently, we extensively discussed the possibility of a spin-off for ESPN/ABC in a release with detailed pro forma financial data. We believe such a move would allow investors to better assess the risk for ESPN/ABC (ideally with a moderate leverage), while DIS as a pure IP company would attract additional shareholders,” the experts wrote.
“A split isn’t about financial gains (we estimate DIS is trading at 18x 2023 P/E and 12x EV/EBITDA, so not exactly cheap), but investors have indicated that they I like the idea, especially since the esports and Disney IP divisions are moving in different directions, with the main obstacles being that DIS needs to deleverage as a standalone company and ESPN/ABC isn’t doing much due to cost increases in cable TV and sports can,” they added.
