Disney, Comcast Can’t Agree on Hulu Valuation; Enlist Third Bank to Determine Streamer’s Final Sale Price
The search is triggered by a clause in Disney and Comcast’s contract for the sale of Comcast’s 33% stake in Hulu.
Those who have been following the saga of Hulu’s ownership will likely remember the discordant public rhetoric between Disney and Comcast regarding the purchase of Comcast’s 33% stake in the streamer. Way back in 2019, when Disney acquired the bulk of Fox’s entertainment assets, it also agreed to buy Comcast’s portion of Hulu by 2024, and the two sides agreed to a minimum valuation of $27.5 billion for the service to serve as the base for an eventual sale price. The two companies finally put away their sharp words and agreed to a step-by-step sale process in November 2023, but that process has now hit a snag. An exclusive report from Reuters says that the two sides are seeking a third banker to help arrive at a final valuation for the streamer, as the firms enlisted by Disney and Comcast to appraise the streamer are too far apart in their judgments.
Key Details:
- Disney’s bank values Hulu at close to $27.5 billion, while Comcast’s bank pegs Hulu’s value at around $40 billion.
- Comcast CEO Brian Roberts has always maintained that Hulu would fetch a much higher price than $27.5 billion if his company’s stake were put up for auction.
- Disney has already cut a check for $8.6 billion for Hulu, and begun merging its content onto Disney+.
The complex sale agreement for Hulu which placed a minimum valuation of $27.5 billion on Hulu in 2019 is not the final say on the company’s worth today. When Disney and Comcast entered into the sale process in November, they agreed that Disney would pay at least $8.6 billion — one-third of $27.5 billion minus capital call contributions payable by Comcast to Disney — for Comcast’s 33% stake in Hulu.
Disney forked over that $8.6 billion in early December, after which the two sides settled in to await word from their chosen investment banks on whether the final valuation of Hulu would exceed $27.5 billion. Disney chose JPMorgan, which came back with a value close to the $27.5 billion floor, while Comcast’s chosen bank Morgan Stanley valued Hulu at more than $40 billion.
How Will Third Banker Determine Hulu’s True Value?
Now that Comcast and Disney have agreed to bring in a third banker to help resolve their valuation dispute, the true endgame of the sale process can finally begin. Per the terms of the sale agreement struck last fall, if the appraisal of Hulu comes in closer to JPMorgan’s evaluation on behalf of Disney, the average of those two valuations will be the final price for Hulu.
Similarly, if the new bank’s valuation of Hulu is closer to Morgan Stanley’s number, those two figures will be averaged to determine Hulu’s value. If the third appraisal finds that Hulu is worth less than the original $27.5 billion, then the final valuation of the streamer reverts back to the $27.5 billion figure. Since Disney has already paid $8.6 billion for Comcast’s third of Hulu, this would essentially complete the sale process.
One outside analyst has already weighed in with the opinion that Hulu is worth at least $45 billion altogether, which would be in line with Comcast CEO Brian Roberts’ frequent insistence that if Hulu was put up for public auction, it would fetch much more than $27.5 billion. The valuation of a company entails a wide range of factors, but as it stands, there’s a good chance that Disney will be opening its checkbook and paying at least a little more to secure Comcast’s portion of Hulu once and for all.
Disney is fortunate that the appraisals are intended to determine Hulu’s value as of Sept. 30, 2023. This week, the company revealed that Hulu and Disney+ had combined to show a profit of $47 million in its fiscal second quarter 2024. A streamer that’s able to show a regular profit is clearly a more valuable business than one that turns in losses each quarter, as Hulu did until its most recent report.
The fact that Disney does not completely own 100% of Hulu yet hasn’t stopped it from executing its vision for the streamer. The official Hulu on Disney+ experience launched in March, and now customers who are subscribed to both services can watch popular Hulu titles like “Shōgun,” “The Bear,” and “Only Murders in the Building” within the Disney+ app.
It appears that a sale process that began five years ago is finally nearing completion. Once a final valuation of Hulu is finally determined, Disney can pay the last of what it owes Comcast for its portion of the streamer, and perhaps dive in more deeply on ironing out licensing agreements that are keeping it from placing every Hulu title on Disney+ for the moment.
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.”