Can Disney and Dan Loeb live happily ever after?

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In today’s newsletter:

Disney fends off Dan Loeb . . . for now

Dealmakers hoping to bid on Disney-owned sports network ESPN — and perhaps score some season tickets in the process — have been benched for now.

Disney had been “deluged” with interest from companies seeking to buy ESPN this year, the entertainment and media group’s chief executive Bob Chapek told the FT’s Christopher Grimes, as rumours swirled that the company was considering selling or spinning-off the cable channel.

Many of those rumours were the result of a campaign by activist investor Dan Loeb. After selling its position in Disney earlier this year and taking out a fresh $1bn stake last month, Loeb’s Third Point called for a spin-off of ESPN to pay down the company’s debts and a board shake-up among other sweeping changes.

But the billionaire hedge fund manager appears to have backpedalled on prior demands for Disney to part ways with the sports network, tweeting over the weekend that Third Point had “a better understanding of ESPN’s potential as a standalone business” with a link to Chapek’s interview with the FT.

We have a better understanding of @espn‘s potential as a standalone business and another vertical for $DIS to reach a global audience to generate ad and subscriber revenues. We look forward to seeing Mr. Pitaro execute on the growth contd. https://t.co/Gobvf8KS2w

— Daniel S. Loeb (@DanielSLoeb1) September 11, 2022

Sports betting had been a crucial reason behind Loeb’s calls for a spin-off. Disney has been slowly wading into the sector ever since the 2018 Supreme Court decision that ended Nevada’s control over the market, acquiring a 6 per cent stake in betting group DraftKings in 2019 when it bought 21st Century Fox.

Loeb felt that Disney’s wholesome image was holding it back from diving headfirst into the explosive sector, however. A spin-off would give ESPN “greater flexibility to pursue business initiatives that may be more difficult as part of Disney, such as sports betting”, Third Point wrote in a letter to Disney last month.

Chapek has ploughed ahead with Disney’s sports betting ambitions nonetheless.

Disney is “working very hard” developing an ESPN sports-betting app, he told Bloomberg at Disney’s D3 expo over the weekend. Chapek, who has recently come under fire for his handling of Florida’s controversial “Don’t Say Gay” bill, spent the event mingling with Disney’s biggest fans — ostensibly to win back their support.

In the spirit of bridge-building, the Disney boss told the FT that he’d “love” to get on board with Loeb’s call for Disney to purchase Comcast’s 33 per cent stake in streaming service Hulu, but said that Comcast has seemed reluctant.

Clinching more sports betting deals could be the most logical step forward as Big Tech giants like Amazon and Apple enter the ring to vie for sports streaming rights and the network’s legacy cable business grows increasingly obsolete.

ESPN chief Jimmy Pitaro is now tasked with proving that the network’s betting app can rival those of top sports betting rivals. DD is curious to see what will become of Disney’s DraftKings stake when the new app rolls out.

Inside EY’s potential mega demerger

The biggest professional services deal of the century is a step closer to becoming a reality after EY’s top bosses signed off on plans to break up the Big Four accounting firm’s audit and consulting businesses. But the work is far from done.

Getting initial sign-off from EY’s global leaders last week took months of internal political wrangling. Some of the firm’s national bosses became so frustrated with their US counterparts’ reluctance to proceed that they began drawing up alternative options for how the restructuring could work, the FT’s Michael O’Dwyer and Stephen Foley revealed.

That unexpected twist sounds a bit like the tail wagging the dog. The US business dominates EY globally, pulling in 40 per cent of its $45bn annual revenues, so its concerns generally carry weight.

But the US operation doesn’t always get its own way. Its previous US boss Kelly Grier quit after a power struggle with global chair Carmine Di Sibio.

More difficult conversations may lie ahead as Di Sibio and his colleagues try to win the backing for the break-up from the firm’s 13,000 partners.

If the deal goes through, the auditors will get cash payouts while the consultants will get shares in their new advisory company. The promise of multimillion-dollar windfalls may just help Di Sibio and co to win hearts and minds.

Bankers and corporate lawyers hammering away at the deal are also poised for a big payday. Goldman Sachs and JPMorgan Chase are advising EY’s global bosses while Rothschild, Lazard and Evercore are on call for national member firms, according to people with knowledge of the matter.

Meanwhile US-based Simpson Thacher & Bartlett and magic circle firms Linklaters and Slaughter and May are offering advice on the legal front.

The Indian start-up citing an M&A delay on its late audits

A start-up filing its audited accounts a few months late is hardly unusual. But being a full year-and-a-half behind schedule? An audit account from $22bn edtech darling Byju is getting uncomfortably tardy.

The delay has prompted an inquiry from the Indian government’s corporate affairs ministry, which is owed the accounts, and shone a harsh spotlight on to the country’s most valuable nascent unlisted company, the FT’s Mercedes Ruehl and Chloe Cornish report.

Fuelled with nearly $6bn in investments and $1.8bn in debt, Byju’s has been on a worldwide deal spree. According to Byju, putting all its new subsidiaries’ accounts together has taken its auditor, Deloitte, additional time to finish examining the books.

Late last year, Byju was reportedly in talks to go public in the US by combining with a blank cheque company, or Spac, led by Michael Klein’s Churchill Capital, in a deal that would have valued the business at more than $40bn.

But sentiment on Spacs — and real life schools — has changed a lot since then, and returning to real classrooms has damped the edtech market.

Meanwhile, India looks to be on the verge of a “funding winter”, after three quarters of declining investment flows into young companies. Plus, Byju is missing about $250mn from two investors who failed to make good on their term sheets.

A Byju spokesperson told the FT that audited accounts should be ready this week. They also said that in July, so DD will be paying close attention.

Job moves

• Peloton chair and co-founder John Foley has abruptly resigned from the connected fitness company along with two other executives, in the biggest management shake-up since Barry McCarthy arrived as chief executive in February.

• Former Apollo Global Management executive Josh Harris has launched a new investment firm, 26North. The venture has recruited 40 executives including Mark Weinberg, a veteran of Brookfield Asset Management and Lehman Brothers who will lead the firm’s private equity unit, and Goldman alum Brendan McGovern to lead direct lending.

• GE has appointed eight directors to the board of GE HealthCare, the conglomerate’s healthcare division which will be spun off in January.

• LumRisk, a risk analytics company chaired by financier Arki Busson, has lost four senior employees as it tries to raise capital and repay bondholders including Louis Bacon’s investment firm Moore Capital.

• Rupert Soames is retiring as chief executive of London-listed contractor Serco. He will be replaced by Mark Irwin, head of Serco’s UK and Europe division. More from Lex.

• New York-based hedge fund Mudrick Capital has named former Bridgewater executive Thomas Bachner as president. Janet Joyce Arzt held the role before becoming CEO of a family office in March of 2021.

Smart reads

Rupert: 1, Bluebell: 0 Richemont boss Johann Rupert has emerged victorious from Bluebell’s activist attack. But the question of when he will relinquish control to a successor still lingers, the FT writes.

Fighting the taxman Property tycoon Jamie Ritblat has utilised M&A to make his real estate investment firm one of the UK’s best-known property investors. But a tax dispute with HMRC threatens to cast a shadow over his empire, the FT reports.

Questionable call Rakuten has failed to learn from the misadventures of fellow Japanese group SoftBank’s misadventures in the crowded and low-margin world of telecoms, Tokyo-based corporate lawyer Stephen Givens writes for Nikkei Asia.

News round-up

FTX Ventures buys 30% stake in Scaramucci’s SkyBridge Capital (FT)

Netflix partners with Ubisoft to bolster fledgling gaming division (FT)

Sony Music exits Russia operations in deal with local company (Nikkei Asia)

Saudi-tied tournament causes push to void Trump’s NYC golf contract (New York Times)

Hedge funds: Och will not be the last to challenge pay in tough sector (Lex)

Barclays vs DB (Alphaville)