Tue. Nov 29th, 2022

Bob Iger is returning to Walt Disney Co as chief executive less than a year after retiring, a surprise return that coincides with the entertainment company’s attempt to boost investor confidence and boost profits at its streaming media unit.

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

Disney shares rose more than 9% in U.S. premarket trading, valuing the company at about $182 billion. Frankfurt-listed shares jumped as much as 10% in European trading on Monday, the best day in nearly two years.

“It may need an old hand at the helm,” said Markets.com analyst Neil Wilson as the company spends billions of dollars to compete with rival Netflix and seeks to revive its share price.

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

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Freeland admits Disney+ cancellation comment ‘privileged’

“The board has concluded that as Disney embarks on an increasingly complex period of industry transformation, Bob Iger is uniquely positioned to lead the company through this pivotal period,” chairman Susan Arnold said in a statement.

Disney disappointed investors this month with an earnings report that showed widening losses at its streaming media unit, which includes Disney+. Shares fell to a 20-year low a day after fourth-quarter earnings.

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

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

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

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

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

It is Trian’s opinion that Iger should not take control of the company again, it said.

The share, which is below the 5% threshold for disclosure, is not as large as Trian would like it to be and is likely to rise depending on market conditions.

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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 about Trian.

Click to play video: 'Freeland acknowledges his privilege in response to criticism over Disney+ comments'

Freeland acknowledges her own privilege in response to criticism of her Disney+ comments

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

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During his first term, Disney’s annual return to shareholders was more than 14%, significantly higher than its competitor Comcast and
the broader stock market.

During this second tour, Iger was tasked with “putting Disney on a path of renewed growth” and working with management to find a successor, the company said.

The change in leadership caught employees by surprise, two company sources said.

Shortly after Iger’s return was announced, Netflix co-founder Reed Hastings tweeted: “Ugh. I was hoping that Iger would run for president. He is amazing.”

(Reporting by Lisa Richwine and Dawn Chmielewski; Additional reporting by Eva Mathews in Bengaluru and Lucy Raitano in London; Graphics by Vincent Flasseur; Editing by Kenneth Li, Miral Fahmy, Josephine Mason, Anil D’Silva and Bernadette Baum)