By the organization’s own admission, tech giant Apple has zero interest in acquiring Disney, but another company is very interested–ready and financially able to scoop up Mickey and the gang, and pre-acquisition procedures have already begun.
Veteran Disney CEO Bob Iger was reinstalled by The Walt Disney Company’s board just before Thanksgiving 2022. Iger’s return was the board’s attempt to stop the proverbial bleed at Disney following one of the most tumultuous times in the company’s history–one that lasted nearly three years and was rife with challenges posed by an unexpected global pandemic that rendered Disney Parks non-operational, poor financial performance, less-than-optimal revenue, and a major rift between the company and the state of Florida.
And while most diehard fans applauded the removal of then-CEO Bob Chapek and were thrilled with the reinstatement of Iger’s tenure, many of them understood that such a shift at Disney’s discretion meant things within the company were likely more dire than anyone expected. It would be months before they discovered just how well their intuitions had served them.
Disney Phones a Friend
Iger was called back to right the ship at Disney, to make the company as profitable as it had been prior to Chapek’s administration, and to work on easing tensions between Disney and Florida’s Gov. Ron DeSantis. But just two days after Chapek’s removal, an insider at Disney made headlines when he told a reporter with The Wrap–though in anonymity–that Iger had plans for the ultimate change within the company–a change that would ultimately solve all of Disney’s pesky little problems.
And Iger would bring about that change by selling The Walt Disney Company to another entity entirely.
The insider, who worked with Bob Iger at Disney before Iger retired in December 2021, said the veteran CEO was just the man for the job, as Iger has long been known for the many acquisitions he initiated and oversaw during his 15 years as chief at The Walt Disney Company.
“He’s going to sell the company,” the insider said during an interview. “This is the pinnacle deal for the ultimate dealmaker.” He continued, saying, “Landing a deal with Apple–or some other megabuyer–would also cement Iger’s legacy, [and] I think he’d welcome it.”
The mystery messenger noted that selling to a company like Apple could make sense for Disney as the two entities have “similar brand identities” and could each benefit from such a venture. The deal would be all the sweeter as it would forever brand Iger’s name under the heading of “last-ever CEO of The Walt Disney Company.”
But a report at AppleInsider in November 2022, which has been updated this week (though it communicates the same message), says that no matter how many times a Minnie-Mickey-iPad-iPhone partnership is suggested, encouraged, talked about, or publicized, Apple simply has no plans for such an acquisition. Such an idea of an Apple-Disney merger or acquisition isn’t a new one, anyway. In fact, Steve Jobs’ untimely passing is likely what stopped a merger many years ago, according to Bob Iger himself.
But while Apple isn’t interested in playing cat and (Mickey) Mouse, another company looks to be positioning itself for such an acquisition, and very few people are talking about it.
Disney’s 2023 Fiscal Third-Quarter Earnings Call Raises More Eyebrows
During The Walt Disney Company’s fiscal third-quarter earnings call on Wednesday afternoon, just after the closing bell on Wall Street, Iger read aloud from the company’s public earnings report, giving details about Disney’s earnings and revenue during the months of April, May, and June 2023.
Iger talked about the continuing lack of profitability of Disney+ and unveiled an increased pricing plan for the less-than-lucrative streaming service. Disney+ rolled out on November 12, 2019, nearly four years ago, and has yet to earn a profit–a problem that continues to plague the entertainment behemoth and one that serves as the cornerstone in a class-action lawsuit brought against Disney by shareholders who allege that top executives in the company–namely former CEO Bob Chapek, former CFO Christine McCarthy, and former Chairman of Disney Media and Entertainment Distribution Kareem Daniel–engaged in illegal business practices by willfully misrepresenting the profitability of Disney’s streaming service, thus misleading investors.
Following Iger’s discussion of information found in The Walt Disney Company’s earnings report, the 72-year-old boomerang CEO turned his attention to answering the questions of several investors as they were asked to him live. Forthcoming could describe nearly all of his responses, save for one about the prospect of Walt’s beloved company being acquired by another entity.
Bob Iger Refuses to “Speculate”
The only credit due Iger in his response is that he refrained from engaging in any dancing that circumvented a bush, and further, he steered clear of interjecting a response that served only to create a diversion from the question at hand like any well-versed politician would have offered.
“I just am not going to speculate about the potential for Disney to be acquired by any company, whether they’re a technology company or not,” Iger said to analysts on the call. “Obviously, anyone who wanted to speculate about such 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.”
Well played, Mr. Iger. Except that the CEO’s refusal to answer the question–“I’ll say no more than that”–served as answer enough for some–this writer included–who then set about the task of digging deeper (once again, this writer included)–presumably deeper than Iger and the board currently want anyone outside the doors of the Burbank offices to venture at this time.
Iger Returns to a Disney Plagued With Challenges, and ESPN Has Been a Chief Thorn in His Side
Iger was recalled by Disney’s board to address a number of challenges within the company–some that reportedly developed as a result of Chapek’s poor performance as CEO and some that resulted from the uncertain nature of business.
Among the many challenges presented to Iger following his return was one with which he was no doubt already familiar: the question of what to do with ESPN, once considered the sports juggernaut owned by Disney. A report by Alex Sherman and Lillian Rizzo at CNBC suggests Iger is hopeful about the development of strategic partnerships with sports leagues like the MLB and the NBA–partnerships that would call for cash infusions or the infusion of assets, such as content, both of which would ultimately save Disney billions:
Disney is considering ways to save cash as it tries to shore up its balance sheet. The media giant’s streaming division continues to lose money — with $512 million lost in its most recent quarter — and the company would like to pay down its $44.5 billion in debt. Disney also likely owes at least $9.2 billion to Comcast for its minority stake in Hulu. Agreeing to a deal where ESPN trades equity for sports rights could potentially save Disney billions of dollars that it can then use for other strategic ventures. ESPN struck a deal earlier this week with Penn Entertainment, which will provide it with $1.5 billion in cash over the next 10 years.
“We’re looking for partners that are going to help ESPN successfully transition to a [direct-to-consumer] model,” Iger said during Wednesday’s earnings call. “And that, as I’ve said, can come in the form of either content or distribution and marketing support or both.”
Revenue and profits for the Disney-owned sports network seem comfortable in their continual nosedive, and they’re in good company with the plummeting revenue and profits across Disney’s other cable networks, all of which were down 6% to $14 billion and 29% to $3 billion, respectively, during the first six months of Disney’s fiscal year 2023 (October 2022 to March 2023). And while Iger looks to the four major sports leagues to buddy up with Mickey, he has other possible solutions simmering on the stove at Disney when it comes to stopping the bleed at ESPN. According to Peter Csathy at The Wrap, the veteran CEO is leaning on the good graces and ingenuity of Disney’s former chief of strategic planning to help him decide the best approach to his ESPN problem:
Iger has retained former top lieutenants Kevin Mayer and [his business] partner Tom Staggs in a ‘consulting capacity’ to help decide ESPN’s fate. This intriguing development followed Iger’s recent uncharacteristically frank and gloomy comments that pointed to the notion of Disney shedding some of the assets it built up under his first run as CEO.
Mayer and Iger were joined at the hip as Disney carried out an enviable string of lucrative mergers and acquisitions during Iger’s first run as CEO. Not only did Mayer handle the strategic planning needed for the successful acquisitions of PIXAR ($7.4 billion in 2006), Marvel Entertainment ($4 billion in 2009), and Lucasfilm ($4.05 billion in 2012), but he also led the charge during Disney’s massive $71 billion buyout of FOX Entertainment’s assets in 2019.
Mayer’s role at the House of Mouse afforded him access to details about Disney’s inner workings, including money trails, the profitability of IPs, and the like. So could Mayer eventually play a role in righting Disney’s unsightly ship? That remains to be seen, but his current associations may ultimately be responsible for settling the question of whether or not to sell The Walt Disney Company to another entity.
A Sale Nearly Seems in the Works, if Not Inevitable
There’s no question that the sell-off of at least a portion of Disney’s assets is on the table. Iger publicly began the work of slimming down the entertainment company in February 2023 when, during the fiscal first-quarter 2023 earnings call, he announced a huge, all-hands-on-deck cost-cutting initiative, effective immediately, that was developed with the goal of excising $5.5 billion from the company’s financial waistline. A reorganization was announced, as well as plans to layoff more than 7,000 employees–all in the name of keeping the Mouse more humble on the balance sheet.
One of PIXAR’s most tenured movers and shakers–one responsible for saving the second Toy Story film from certain demise–was among those let go at Disney, and an epic upheaval in the Disney-owned ABC News division left many jobless, and the ones who survived the cuts were then awarded heavier caseloads to cover the gaps left by those who got the boot. Following Disney’s wave of layoffs, the company then announced the decision to sell off nearly one-third of its assets, though as of the time of this publication, the for sale sign on ABC’s front lawn remains.
The Walt Disney Company’s current financial dilemma gives every appearance of being dire, indeed.
But the return of Disney’s former king of strategic planning, Kevin Mayer, to CEO Bob Iger’s side may very well be the lead-up to the acquisition of Disney by the Blackstone Group, a huge private equity firm that currently manages $1 trillion in mergers and acquisitions (M&A), with a majority shareholder named the Vanguard Group–the same majority shareholder of Walt Disney Company stock.
Mayer and his business partner, Kevin Staggs, another former lieutenant under Iger also called to serve in a consultative role at Disney, are co-CEOs of Candle Media, an expanding media holding company that owns actress Reese Witherspoon’s Hello Sunshine, which it purchased for $900 million, and Moonbug Entertainment, creators of the children’s educational media brand CocoMelon, the acquisition of which cost Candle $3 billion.
And while at first glance, it makes sense that Iger would bring back two of his most trusted cohorts to run through a best-practices approach related to ESPN, a quick jaunt along the money trail at Candle Media makes it look very possible that there’s more going on here than meets the visionary eye. Candle Media’s financial backer is the Blackstone Group. And as the manager of $1 trillion in M&A, Blackstone has all the cheese it could ever need to lure a hungry mouse.
And according to journalist Peter Csathy at The Wrap, the return of Mayer and Staggs to The Walt Disney Company’s offices could easily be a scouting out of the property before the final purchase by Blackstone:
Mayer, Staggs, and their Blackstone benefactors theoretically could mastermind a takeover of all of Disney by leveraging massive debt, as well as cash. But that’s not likely, particularly in this era of continuously rising interest rates. Much more likely would be for Mayer and Staggs to buy what they deem to be Disney’s tastiest morsels. Since they are consulting for Iger about ESPN’s fate, that’s an obvious place to start. One person’s ‘consulting’ is another person’s ‘due diligence’ in advance of a potential acquisition.
After an acquisition of one or more parts, Mayer and Staggs could return to the mothership to work the magic they might have hoped to as Iger’s heirs before his surprising anointment of parks chief Bob Chapek. The private equity playbook — streamlining operations, accelerating growth and getting liquid within five to seven years — could work here. Disney’s distressed stock price certainly makes this possibility more probable today.
The current financial state of affairs at Disney may leave Iger with few options for a solution, and the acquisition of Disney by the Blackstone Group is not only within the realm of possibility, but the initial “test drive” may have already taken place.