Disney May Have to Pay $5 Billion More for Comcast's Hulu Stake
Walt Disney revealed on Wednesday that it may need to pay up to $5 billion more to buy Comcast's minority stake in Hulu. This adjustment hinges on an appraiser's agreement with Comcast's assessment, valuing the stake at over $40 billion.
Earlier this year, Disney and Comcast enlisted investment bank RBC Capital as an independent appraiser to resolve their dispute over valuing the 33% stake in the streaming platform. According to sources familiar with the matter, the two sides have entered arbitration proceedings, with a final decision expected in fiscal 2025.
Disney and Comcast's 2019 agreement, following Disney's $71 billion acquisition of Fox's assets, includes an option strike date of January 2024. This agreement granted Disney majority control over Hulu, as it already owned a 33% stake. Comcast retained its stake, anticipating its value would significantly increase by 2024.
In November last year, Disney agreed to take control of Hulu, committing to pay Comcast at least $8.6 billion for the remaining 33% stake. This followed Comcast triggering the deal as part of their 2019 agreement. Disney stated on Wednesday that if the independent appraiser's valuation is equal to or below the guaranteed floor value of $27.5 billion, it would owe Comcast no more than the $8.6 billion already paid. If RBC's appraisal aligns with Comcast's $40 billion valuation, Disney will owe an additional $5 billion. If the valuation falls between the earlier assessments, Disney's extra payment could range between $0 and $5 billion.
JPMorgan, advising Disney on this transaction, valued Hulu at less than $27.5 billion, the floor valuation set in the 2019 "put-call" agreement. Meanwhile, Comcast's adviser, Morgan Stanley, valued Hulu at $40.8 billion. Regulatory filings from last year indicate that if the valuations by their banks were within 10% of each other, a deal would proceed at an averaged valuation. Given the more than 10% discrepancy, Comcast and Disney appointed RBC for an independent appraisal.
