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With an ABC Sale on the Table, Bob Iger Brings Disney Back to Dealmaking Business

Deals would be the defining feature of Bob Iger's time as CEO of Disney from 2005 until 2020.

He paid $7.4 billion for the computer animation company Pixar founded by Steve Jobs in 2006; $4 billion for the struggling comic book publisher Marvel in 2009; $4 billion for George Lucas' Lucasfilm in 2012; $1.6 billion for a majority stake in BamTech, the streaming video company that served as the foundation for Disney+ and Hulu in 2017; and finally, $ 4 billion for the Fox entertainment assets in 2019.

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It now appears evident that Iger's second term as CEO will be characterized by his dealmaking following a big interview on Thursday. But this time, he's mostly a seller rather than a buyer.

Iger provided his opinion on Disney's future in streaming and what it means for several of its legacy industries while speaking to CNBC's David Faber on a makeshift TV set by the side of the road in Sun Valley, Idaho.

That probably refers to a "strategic partnership" in ESPN's case, one that will aid in its transition to direct-to-consumer.

Well, Iger's remark that "they may not be core to Disney" in regards to its linear TV networks is the Sun Valley equivalent of a "for sale" sign.

In particular, the linear business, which we are expansive in our thinking about, Iger said, "transformative work is dealing with businesses that are no-growth businesses and what to do about them."

Iger responded when the CNBC host specifically mentioned the ABC broadcast network, its local TV stations, and the FX cable channel and questioned if they were for sale and if they were not important to Disney.

"The distribution model, the business strategy that supports that enterprise and has generated significant revenues over the years, is unquestionably flawed. Iger continued, "And we have to say it as it is.

According to a report published on Thursday by Wells Fargo analyst Steven Cahall, selling the linear assets would raise Disney's CAGR (which measures a company's growth rate) to more than 20%. Cahall believes that the ABC Network, its local stations, FX, Freeform, and Disney's 50% ownership of A+E Networks are all up for grabs.

"Divesting such assets would bring in cash and improve EPS growth," Cahall wrote. "The rationale would be getting rid of an asset that worries investors while stepping into a better growth, more streamlined DIS."

Who would purchase a depreciating asset like a linear TV network, though?

According to Cahall, "DirecTV was sold, and private equity is involved in linear TV broadcast." In other words, ABC or Freeform's future may resemble that of newspapers, where private equity and hedge funds buy up failing but cash-flow-rich companies and find out how to keep margins at a reasonable level.

Iger made it clear that Disney wants to keep its ownership of ESPN. but that a "strategic partner" who could contribute would be appreciated.

"Whether it's content value, distribution value, capital value, or anything else," he said, "we're going to be very open minded about that if they come to the table with value that enables ESPN to make a transition to its direct-to-consumer offering."



Daniel Jack

For Daniel, journalism is a way of life. He lives and breathes art and anything even remotely related to it. Politics, Cinema, books, music, fashion are a part of his lifestyle.