Walt Disney and Comcast are currently in the process of hiring a financial advisor to settle a valuation dispute regarding Hulu. This step comes as part of the enforcement of a previous agreement related to Disney’s acquisition of a 33% stake in Hulu from Comcast.
The need for an independent valuation arose due to a significant difference in the valuations provided by JPMorgan Chase and Morgan Stanley, which served Disney and Comcast respectively.
According to sources, JPMorgan Chase has valued Hulu at approximately $27.5 billion for Disney, aligning with the minimum valuation agreed upon in their 2019 “put-call” agreement. Conversely, Morgan Stanley has assessed Hulu’s value for Comcast at over $40 billion. This discrepancy has prompted both companies to consider appointing an external investment bank to independently determine Hulu’s value.
The context of this valuation conflict stems from a deal that was formulated following Disney’s $71 billion acquisition of Fox’s assets in 2019, which included a minority stake in Hulu, granting Disney a majority control. Despite Disney’s increased control, Comcast retained its 33% stake with the expectation of its value appreciating by January 2024. In November last year, an agreement was activated by Comcast, compelling Disney to buy out its remaining stake in Hulu for a minimum of $8.6 billion.
This situation is further complicated by the stipulations outlined in last year’s regulatory filings by Disney and Comcast. These stipulations state that if the valuations by JPMorgan and Morgan Stanley are within a 10% range of each other, the final valuation would be an average of the two. However, the current valuations exceed this margin, necessitating the involvement of a third bank.
If the third-party valuation aligns more closely with either of the initial appraisals, the average of the closer two will be used to finalize the deal. There’s also a safeguard clause that if the combined average falls below $27.5 billion, the valuation will default to this minimum threshold.
Hulu, known for its popular shows like “Shogun,” “The Bear,” “Prey,” and “Only Murders in the Building,” reported a subscriber base of 49.7 million as of December 2023. This represents a modest 2% growth from the previous quarter. The platform was fully integrated into Disney’s Disney+ service, expanding its streaming offering which includes hits like “Moana” and “Frozen.”
The negotiations and potential outcomes of this financial appraisal are pivotal, as Hulu has been described by Comcast CEO Brian Roberts as a “scarce kingmaker asset” with substantial value, notably higher than at the time of the original deal.
Disney and Comcast’s pursuit to resolve this valuation conflict through the selection of an independent advisor underscores the strategic importance of Hulu within the broader landscape of streaming media, where accurate valuation can significantly impact the financial dynamics and control of content distribution.
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