Disney Could Owe Comcast $5 Billion More to Complete Purchase of Hulu
Disney has already cut an $8.6 billion check for Hulu, and has resisted attempts by Comcast to get more.
Disney had better have an eye on its bank balance in the coming months. The company may end up owing Comcast yet another rather large check. Disney is still in the process of buying Comcast’s portion of Hulu and has already paid $8.6 billion for the 33% stake in the streamer that NBCUniversal’s parent company currently owns. The sale process has dragged on for nearly a year because Disney and Comcast have not agreed on a total valuation for Hulu. That is preventing the sale from closing, and a document filed by Disney with the Securities and Exchange Commission (SEC) has details on just how much more the House of Mouse might have to plunk down to finish the process once and for all.
Key Details:
- Comcast officially exercised its contractual clause triggering the sale of its Hulu stake to Disney in late 2023.
- Independent bankers enlisted by Disney and Comcast came up with vastly different valuations of the company.
- Disney may owe as much as $5 billion more for Hulu, depending on the results of an appraisal by a third bank.
The final valuation of Hulu is currently in the hands of an investment bank, which is trying to appraise the company to see how much one-third of it is worth. Disney maintains that Hulu is worth around $27.5 billion — the contractually agreed upon minimum value — while Comcast insists the real number is north of $40 billion.
If the appraiser determines that Comcast’s valuation of Hulu is accurate, Disney could end up paying $5 billion more to own all of Hulu according to this week’s SEC filing. If, on the other hand, it agrees with Disney, there would be no need for the company to pay extra to finish the sale process of Hulu. The number could also fall between $0 and $5 billion if the bank determines Hulu’s real worth is somewhere between $27.5 billion and $40 billion.
How Did Disney and Comcast Reach This Point?
The transaction between Comcast and Disney has its roots in the 2019 sale of Fox’s entertainment assets to Disney; those assets included a 33% stake in Hulu. That gave Disney 67% of the streamer, and it was then that Disney and Comcast struck a deal: By 2024, Disney would buy Comcast’s portion of Hulu, and a minimum valuation of $27.5 billion was agreed to by both parties, meaning that Disney would have to pay at one-third of that amount— $8.6 billion — at the least to get Comcast’s share.
Some very public sniping between the two sides occurred in the intervening years, but things never got truly serious until November 2023. That’s when Disney announced that the sale process had officially begun, and a month later it delivered a check for $8.6 billion to Comcast, one-third of the $27.5 billion minimum valuation minus capital call contributions paid by Comcast to Disney.
Comcast has always maintained that Hulu is worth more than $27.5 billion, and an independent banker enlisted by the company to appraise the streamer agreed. Disney brought in its own bank to value Hulu accurately, and its figure was closer to the $27.5 billion mark. That disagreement triggered the enlistment of a third bank to determine Hulu’s value, and the results of that assessment are expected sometime in Disney’s fiscal 2025, according to its SEC filing this week.
An assessment in Comcast’s favor would be a blow to Disney, and a vindication for Comcast chair Brian Roberts, who has always maintained that one-third of Hulu would fetch significantly more than $8.6 billion if it were put on the open market. Earlier this week, Disney surprised the marketplace by announcing that its streaming services — including Hulu — had achieved profitability one quarter early when it reported that its quarterly earnings results on Wednesday, but having to shell out another $5 billion for Hulu would certainly sour the mood around its corporate headquarters.
The target date of fiscal 2025 to hear back from the bank now appraising Hulu could mean we have an answer before the end of the 2024 calendar year since Disney is already in its final fiscal quarter of 2024. Both Disney and Comcast are likely looking forward to having the process over and done with, no matter what the third bank has to say about Hulu’s valuation.
Hulu
Hulu is a video streaming service that gives access to thousands of full seasons of exclusive series, hit movies, kids shows, and Hulu Originals like “Only Murders in the Building,” and “The Handmaid’s Tale.”