Activist investor nabs 20M shares of Comcast

Activist investor Trian Fund Management has taken an $870 million stake in Comcast based largely on the belief that the company is undervalued, The Wall Street Journal reported.

Trian confirmed that talks are underway with Comcast. Comcast declined comment.

"Trian believes Comcast's stock is undervalued. We have recently begun what we believe are constructive discussions with Comcast's management team and look forward to continuing those discussions," a Trian spokesperson said in an emailed statement.

A person familiar with the situation also confirmed that Trian owns about 20 million shares of Comcast. The WSJ said the stake gives Trian about 0.4% of the company.

The report points out that Trian "often seeks to encourage change at companies it targets, such as a breakup or sale of underperforming divisions ... and better use of capital," but often tries to "avoid public spats."

Trian is a hedge fund founded in 2005 by Nelson Peltz, Ed Garden and Peter May.

The WSJ said Comcast is a "big undertaking for Trian," though the fund has targeted large companies such as Procter & Gamble, DuPont de Nemours and General Electric. Trian's current portfolio included Ferguson plc (a distributor of plumbing and heating products in North America), GE, Mondelēz International, (a snack food company that makes products such as Oreos and Ritz crackers) and P&G (the company behind consumer brands such as Tide, Crest, Gillette and Pampers).

Shares in Comcast closed Monday at $44.68 each, down 1.28%, and were down slightly in after-hours trading.

Comcast shares have weathered the pandemic, mostly due to the performance of its cable division and growth of its broadband base, even as its pay-TV base continues to erode and its NBCUniversal and Sky units struggle. However, Comcast's valuation issues have not been lost on industry analysts.

Comcast is "still woefully undervalued," Craig Moffett, analyst with MoffettNathanson, noted in a report issued in July following the company's Q2 2020 results. He cited frustrations with the company's "neither fish nor fowl" portfolio.

"Short of separating the business into two, which we have no reason to expect, we're still not sure what it will take for the valuation gap to close," he wrote at the time. "Comcast is now quintessentially a value stock. And value stocks are out of favor."

Cable activity perking up
Although Trian's end-game here is somewhat murky, the purchase of shares comes alongside some wheeling and dealing involving the North American cable industry.

Among recent examples, Altice USA has made an unsolicited bid for Cogeco that includes a plan to retain Cogeco's US assets (Atlantic Broadband) and sell Cogeco's Canadian assets to Toronto-based Rogers Communications. That offer has been strongly rejected.

In late August, Reuters reported that TPG Capital was shopping the sale of Astound, a conglomerate that includes RCN, Grande Communications and Wave Broadband, and seeking up to $8 billion for the lot.

AT&T, meanwhile, has come under pressure from Elliott Management to reconsider the telco's M&A strategy and to re-evaluate its assets. AT&T has already promised to stop making big acquisitions, with reports surfacing in recent weeks that AT&T is exploring a sale of its Xandr advanced advertising unit and also looking into a possible divestment of its struggling DirecTV business.

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— Jeff Baumgartner, Senior Editor, Light Reading