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Activist investor Dan Loeb backs off pushing Disney to sell ESPN

Activist investor Dan Loeb signaled Sunday morning on Twitter that he is backing off his push to persuade Walt Disney Co. DIS 2.54%▲ to spin off its popular sports television network ESPN.

The change of heart comes after Disney Chief Executive Bob Chapek said in media interviews at this weekend’s D23 Expo event—an annual gathering of Disney fans where the company announces new shows and films—that he has plans for ESPN to be a big growth engine and a large part of the company’s entertainment offerings.

“As Bob has said, ESPN is an integral part of the Walt Disney Company, and he believes that its full potential will continue to be realized,” said Disney spokeswoman Kristina Schake on Sunday.

Last month, Mr. Loeb’s hedge fund, Third Point LLC, said it had renewed its stake in Disney stock after having liquidated one earlier this year. He sent a letter to Mr. Chapek asking for major changes to Disney’s business, including spinning off ESPN, refreshing Disney’s board and cutting spending.

“We have a better understanding of ESPN’s potential as a stand-alone business and another vertical for [Disney] to reach a global audience to generate ad and subscriber revenues,” Mr. Loeb wrote on Twitter on Sunday. “We look forward to seeing [ESPN chief James] Pitaro execute on the growth and innovation plans, generating considerable synergies as part of The Walt Disney company.”

Mr. Loeb declined to comment beyond his tweets, a spokeswoman said, adding that the rest of the requests that Mr. Loeb made in his letter to Disney still stand. Messrs. Loeb and Chapek have regular conversations and are currently in close contact, people familiar with the matter said.

The new stake for Mr. Loeb’s fund represented less than 1% of Disney’s shares outstanding and at the time had an economic value of around $1 billion, The Wall Street Journal has previously reported.

Disney shares are down 26.5% this year as of the close of trading Friday. In August, the company reported stronger-than-expected financial results and an addition of 14.4 million subscribers to its Disney+ streaming service.

Last month, Disney said in response to Mr. Loeb’s Third Point letter that it welcomes the views of all of its investors. The company said its board has been continuously refreshed, with an average tenure of four years.

The idea of selling ESPN—which sends a steady flow of cash to Disney via licensing agreements with cable-TV operators—has come up frequently in recent years as the price of sports broadcast rights has steadily risen. Some investors have argued that ESPN is more valuable as a stand-alone company than as a division of Disney.

“We have a better understanding of ESPN’s potential as a stand-alone business and another vertical for [Disney] to reach a global audience to generate ad and subscriber revenues,” Mr. Loeb wrote on Twitter on Sunday. “We look forward to seeing [ESPN chief James] Pitaro execute on the growth and innovation plans, generating considerable synergies as part of The Walt Disney company.”

Mr. Loeb declined to comment beyond his tweets, a spokeswoman said, adding that the rest of the requests that Mr. Loeb made in his letter to Disney still stand. Messrs. Loeb and Chapek have regular conversations and are currently in close contact, people familiar with the matter said.

The new stake for Mr. Loeb’s fund represented less than 1% of Disney’s shares outstanding and at the time had an economic value of around $1 billion, The Wall Street Journal has previously reported.

Disney shares are down 26.5% this year as of the close of trading Friday. In August, the company reported stronger-than-expected financial results and an addition of 14.4 million subscribers to its Disney+ streaming service.

Last month, Disney said in response to Mr. Loeb’s Third Point letter that it welcomes the views of all of its investors. The company said its board has been continuously refreshed, with an average tenure of four years.

The idea of selling ESPN—which sends a steady flow of cash to Disney via licensing agreements with cable-TV operators—has come up frequently in recent years as the price of sports broadcast rights has steadily risen. Some investors have argued that ESPN is more valuable as a stand-alone company than as a division of Disney. The Wall Street Journal

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