Tara Lachapelle
Dec 5, 2016 2:16 PM EST
Disney without ESPN? An idea some thought improbable, if not crazy, is now catching on.
Walt Disney Co. has lost some of its sparkle this year. The shares are headed for their worst annual performance since the U.S. recession in 2008, snapping a four-year rally in which the price had nearly tripled.
Back in May, I wrote that a breakup of Disney may be his answer.
Separating ESPN (or the media networks division altogether) could not only help lift the company's sagging valuation, but also make it a little easier to find a successor. Recall that Tom Staggs, the Magic Kingdom's heir apparent, abruptly stepped down as chief operating officer earlier this year. And former CFO Jay Rasulo, the other possible pick, quit in 2015.
Since then, ESPN has continued to weigh on Disney's results as the NFL struggles to keep viewers. A Nielsen report showed that ESPN, ESPN 2 and ESPNU lost more than 600,000 subscribers from October to November. ESPN's NFL ratings have suffered a 17 percent decline this season, according to Nielsen data as of last week.
Separately, Disney's ABC network is faring the worst among the top broadcasters, with ratings down 11 percent for the season as of Nov. 9 versus a year ago.
Last month, billionaire John Malone -- the dealmaker of all media dealmakers -- speculated that Disney may spin off or sell ESPN, along with maybe ABC. He then went so far as to say Apple Inc. may be interested in merging with Disney after the split. The Edge, which analyzes spinoffs, has written about a Disney breakup, too, noting that the media networks and the rest of Disney "lack sufficient synergies and have vastly different outlooks and business model challenges."
Now, RBC Capital Markets analyst Steven Cahall is jumping on the bandwagon. In a report Monday, Cahall wrote that ESPN "has almost single-handedly de-rated Disney by about 3.5 to 4 turns" of its Ebitda multiple. After the stock got a small pop Monday, Disney was valued at 10.7 times the Ebitda it generated in the past 12 months. That's down from a multiple of nearly 14 about a year ago, according to data compiled by Bloomberg.
https://www.bloomberg.com/gadfly/articles/2016-12-05/disney-can-remove-espn-discount-with-breakup
Dec 5, 2016 2:16 PM EST
Disney without ESPN? An idea some thought improbable, if not crazy, is now catching on.
Walt Disney Co. has lost some of its sparkle this year. The shares are headed for their worst annual performance since the U.S. recession in 2008, snapping a four-year rally in which the price had nearly tripled.
Back in May, I wrote that a breakup of Disney may be his answer.
Separating ESPN (or the media networks division altogether) could not only help lift the company's sagging valuation, but also make it a little easier to find a successor. Recall that Tom Staggs, the Magic Kingdom's heir apparent, abruptly stepped down as chief operating officer earlier this year. And former CFO Jay Rasulo, the other possible pick, quit in 2015.
Since then, ESPN has continued to weigh on Disney's results as the NFL struggles to keep viewers. A Nielsen report showed that ESPN, ESPN 2 and ESPNU lost more than 600,000 subscribers from October to November. ESPN's NFL ratings have suffered a 17 percent decline this season, according to Nielsen data as of last week.
Separately, Disney's ABC network is faring the worst among the top broadcasters, with ratings down 11 percent for the season as of Nov. 9 versus a year ago.
Last month, billionaire John Malone -- the dealmaker of all media dealmakers -- speculated that Disney may spin off or sell ESPN, along with maybe ABC. He then went so far as to say Apple Inc. may be interested in merging with Disney after the split. The Edge, which analyzes spinoffs, has written about a Disney breakup, too, noting that the media networks and the rest of Disney "lack sufficient synergies and have vastly different outlooks and business model challenges."
Now, RBC Capital Markets analyst Steven Cahall is jumping on the bandwagon. In a report Monday, Cahall wrote that ESPN "has almost single-handedly de-rated Disney by about 3.5 to 4 turns" of its Ebitda multiple. After the stock got a small pop Monday, Disney was valued at 10.7 times the Ebitda it generated in the past 12 months. That's down from a multiple of nearly 14 about a year ago, according to data compiled by Bloomberg.
https://www.bloomberg.com/gadfly/articles/2016-12-05/disney-can-remove-espn-discount-with-breakup
