It might not be the same as Mickey and Minnie getting divorced, but one activist investor thinks it may be time for a Disney (DIS -0.04%) breakup.
Blackwells Capital, the latest activist investor to emerge at the House of Mouse, suggested Disney's corporate segments would be better off going their separate ways.
Joining Nelson Peltz's Trian Fund in staging a proxy fight at the entertainment giant, Blackwells is seeking three board seats, and in a letter to shareholders, it proposed breaking up the company into standalone sports, entertainment, and experiences businesses.
According to Blackwells' sum-of-the-parts analysis, the business would be worth roughly 64% more than it is today if it was cut into three pieces at an implied share price of $163.07.
Blackwells' analysis is based on 2025 estimates based on earnings before interest, taxes, depreciation, and amortization (EBITDA) of $2.8 billion for sports, $3.8 billion for entertainment, and $13.7 billion for experiences. It also assigned a multiple of 21.5 for sports and entertainment, and 16.5 for experiences, leading to the valuation. Roughly 60% of the value of the business comes from experiences, according to Blackwells.
Image source: Disney.
Is Disney stock worth more broken up?
Disney, under CEO Bob Iger, has long touted the strength of its flywheel model, where the company can create or acquire intellectual property and leverage it across multiple channels, including movies and TV, theme park experiences, live events, and consumer products such as toys. Disney's wealth of intellectual property and its reach across multiple product categories is unique, and it's part of what's made the company so successful over its 100-year history.
While Blackwells supports CEO Bob Iger, it's also aware that Iger is planning to retire in 2026 and no successor has been chosen. The task of running Disney may be too tough for the next CEO, as Blackwells contends: "Disney may simply be too complex for any one successor to Mr. Iger to manage holistically, and Blackwells believes that it is the responsibility of the Board to oversee these types of analyses (referring to the sum of the parts) in the ordinary course."
Blackwells also plans to nominate three members, one of whom, Craig Hatkoff, is on the board of Manhattan's largest office landlord, SL Green, and has expertise that "extends to exploring strategic possibilities with cold eyes."
Why the Blackwells campaign could help Disney stock
A breakup of Disney seems unlikely given its flywheel business model and questions about sharing existing and future intellectual property across the different segments, but Blackwell's larger point is valid.
Disney is undervalued for the potential of the business, and something needs to be done to fix it. Blackwells' other suggestions include making strategic changes to its streaming services to drive faster growth and for it to tap new spatial computing devices like the Apple Vision Pro to give fans unique experiences with Disney IP, like a lightsaber fight with a Jedi.
Peltz and Trian feel the same way. The pressure from the activists should help push the stock up one way or another, and in fact, Disney shares rose 2.7% on Tuesday, seemingly in response to Blackwells' letter.
A new slate of directors might help Disney unlock new revenue streams such as spatial computing, but the company's turnaround could also come fast enough to satisfy the activists.
Disney raised prices on its streaming services last October, which means the impact of the increases will show up in its fiscal first-quarter earnings report after hours today . The company had said that its streaming division would be profitable by September, but that could come even sooner, especially since most of those price increases should flow to the bottom line.
Iger also said a few months ago that after a year back at the helm he was done fixing the business and ready to start building again, a sign that a recovery could be nigh.
We'll learn more when Disney releases the first-quarter numbers. If it's a solid quarter, the stock should jump on the news. If it's a disappointment, the activists should help put a floor on the stock, and their case for change will only grow stronger.
