Breakingviews: Nelson Peltz prods Comcast into a defining moment

Nelson Peltz is knocking on Brian Roberts’ door. The activist’s hedge fund Trian Fund Management has taken a stake in Comcast. It’s small and Roberts’ big voting interest gives the corporate cage rattler tough odds. Still, the U.S. entertainment company has room to improve its valuation.

Peltz’s fund disclosed the investment on Monday, noting Comcast should be worth more than its current $204 billion. So far he has amassed 20 million shares, amounting to a less than 1% stake. Peltz worked small slices to his advantage in past campaigns gaining board seats and pushing cost cuts across General Electric, Procter & Gamble and DuPont. Yet with Comcast, the Roberts family is firmly standing in his way, with some 33% of the vote making any real shakeup a tall order.

Nonetheless, Peltz is onto something. Comcast has both a cable business, which made up more than half of its $109 billion in revenue last year, and programming assets, broadcast network NBC and movie studio Universal Pictures. Investors tend to like media companies to focus on one or the other. For example, Walt Disney, which is mainly a content company, is valued at a whopping 24 times last 12 months EBITDA as of Monday. Charter Communications, a pure cable play, trades at 12 times. Comcast, at roughly 9 times, is worse off than both. But it has further to fall if it isn’t careful. AT&T, itself once a target of Paul Singer’s Elliott Management, trades at a lowly 6 times.

The selling point of a controlled company is that the owner can execute a long-term vision quickly, which means Peltz will only have to convince one person. If he plays his cards right, Roberts may not be hard to win over. He has been reshaping Comcast to look less like Charter and more like Disney for years, starting with his prudent two-step purchase of NBC Universal from GE. He noted earlier in September Comcast is going to stay that course focusing on broadband, aggregation and streaming video – that is if Peltz doesn’t prod him to redefine the mission.

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