Comcast : Activist Trian Fund Management Takes Stake in Comcast -- Update

By Corrie Driebusch and Lillian Rizzo

Activist investor Trian Fund Management LP, known for pushing big companies to make operational and other changes, has taken a stake in ComcastCorp. in a bet that the cable giant's stock is undervalued.

Trian has accumulated about 20 million shares in Philadelphia-based Comcast, for a roughly $900 million stake or about 0.4% of the company, a person familiar with the matter said. Comcast's market value is about $200 billion.

Executives at Trian, which was founded by Nelson Peltz, Ed Garden and Peter May, recently began conversations with Comcast management, the hedge fund said in a statement Monday, confirming an earlier report by The Wall Street Journal. It isn't clear what exactly Trian is focused on beyond a belief that Comcast shares are undervalued.

Trian is known for encouraging changes at companies it targets, such as a breakup or sale of underperforming divisions or moves to improve efficiency and better use capital. It often seeks board representation and tries to avoid public spats, unlike some of its more pugnacious rivals.

Trian, which manages roughly $8.8 billion, is accustomed to hunting large prey, having targeted companies including Procter & Gamble Co., DuPont de Nemours Inc. and General Electric Co.

But forcing change at Comcast -- assuming that is what Trian tries to do -- could be difficult. The family of Brian Roberts, its chairman and chief executive, holds a significant voting stake in Comcast. Its stock has performed relatively well and hit an all-time high before the onset of the coronavirus pandemic, which briefly sent it down sharply. The shares have since recovered as Comcast's broadband business has held up well in the pandemic.

Comcast's businesses include the Xfinity-branded broadband and pay-TV unit, the NBCUniversal entertainment unit and Sky, a U.K.-based satellite-TV operator and entertainment company.

Trian confirmed the stake in a securities filing, disclosing ownership of roughly 7.2 million Comcast shares as of the end of the second quarter. The stake has since grown to roughly 20 million.

"We have recently begun what we believe are constructive discussions with Comcast's management team and look forward to continuing those discussions," Trian said.

A Comcast spokeswoman didn't have an immediate comment.

Comcast's stock jumped more than 2% on the news, though it ended Monday down 1.3% at $44.68.

Comcast earlier faced criticism from investors and analysts who believe it overpaid for Sky, which the company acquired for $38.8 billion roughly two years ago. The purchase price rose significantly due to a bidding war with 21st Century Fox Inc., which ended with a blind auction in which neither party knew what the other had offered. Comcast ended up offering GBP17.28 a share, equivalent to $22.32, surpassing Fox's offer of GBP15.67.

Comcast's quest for Sky came after it lost a bidding war with Walt Disney Co. for Fox's entertainment assets, which went for $71 billion. The Fox assets not sold to Disney are now known as Fox Corp., which shares common ownership with Journal parent News Corp.

Sky's business was heavily hit by the coronavirus pandemic, with revenue dropping by 16% in the second quarter as advertising revenue plunged by 43%.

At the time of the Sky deal, Comcast executives said it would lift the company's user base and boost its ability to invest in technology, programming and valuable sports-media rights.

Comcast's main entertainment unit, NBCUniversal, was also hit by the pandemic, with its revenue dropping 25% due to the halt of theatrical releases, the temporary closure of its theme parks and a sharp decline in advertising on its broadcast and TV networks.

Unlike NBC and Sky, Comcast's broadband business is growing at a fast clip, and Mr. Roberts recently said he expects third-quarter subscriber growth to set a record. At a conference last week, Mr. Roberts said there will likely be more than 500,000 broadband customer additions in the period.

"The cable business is an infrastructure asset with steady growth and very high free cash flow," said MoffettNathanson analyst Craig Moffett, referring to Comcast's broadband, pay-TV and phone unit. "The other two businesses, Sky and NBC, are sort of cyclical turnaround stories. They naturally appeal to entirely different types of investors."

He added: "I can't imagine a shareholder that would disagree that this company would be valued more highly if it were separated into pieces."

NBCUniversal Chief Executive Jeff Shell has been pursuing a major reorganization centered around the growth of the company's new subscription streaming-video service, Peacock.

That has entailed layoffs and other cost-cutting measures. The company is creating a centralized unit to decide which programming to create and which networks or digital platforms should distribute it, a major shift from the entertainment industry's traditional approach of empowering the management at individual TV channels.

Peacock was the latest effort by a media and technology giant to catch up with Netflix Inc., the subscription-streaming service that has a long lead on many of its competitors. Disney, Apple Inc., AT&T Inc. and Comcast have all launched streaming services over the past year.

Write to Corrie Driebusch at [e-mail] and Lillian Rizzo at [e-mail]