Disney and Comcast seek A Financial Consultant To Address Hulu Valuation

Walt Disney and Comcast are reportedly seeking to engage a financial advisor to help them settle their disagreement on the valuation of the 33% share in streaming service Hulu that the former will purchase from the latter.

TakeAway Points:

  • According to reports, Walt Disney and Comcast are trying to work with a financial counsellor to resolve their differences on the value of the 33% of the streaming service Hulu that the former would buy from the latter.
  • The action is compliant with the agreement the corporations reached with Hulu in the previous year.

Walt Disney and Comcast  Hulu Valuation Disagreement

The action is compliant with the agreement the corporations reached with Hulu in the previous year. Their contract calls for taking this move if the valuation assessments of JPMorgan Chase, which gave Disney a fair judgement on Hulu, and Morgan Stanley, which gave Comcast a similar opinion, diverge too much.

The report claims that JPMorgan valued Hulu at nearly $27.5 billion for Disney, which is the floor valuation that the companies agreed upon in their 2019 “put-call” agreement.  However, according to a second source, Morgan Stanley estimated Hulu’s value for Comcast at above $40 billion.

The sources, who asked to remain anonymous since the information is private, claimed that Disney and Comcast are already in negotiations to appoint an investment bank that will evaluate Hulu on its own.

With 49.7 million users as of the end of December 2023, Hulu—which has well-known original series like “Shogun,” “The Bear,” “Prey,” and “Only Murders in the Building”—had grown by 2% from the previous quarter.

Brian Roberts, Comcast CEO, referred to Hulu as a “scarce kingmaker asset” that is “far more valuable today” than it was when the agreement was first announced at a Goldman Sachs conference last year.

Disney and Comcast Evaluation

Disney and Comcast had said in regulatory filings from the previous year that a deal would close at the average of the two evaluations if the valuations obtained by their two banks were within 10% of one another.

According to the report, Comcast and Disney are in collaborative talks to select a third bank to do an independent appraisal because the two appraisals differ by more than 10%.

Under the terms of the agreement, the value at which the deal closes will be the average of the two appraisals, with the third evaluation being the one that is closest to the valuation that Disney’s bank generated.

The price at which the deal closes is determined by averaging the two appraisals; similarly, if the third appraisal’s value is closest to the one provided by Comcast’s bank.

The final valuation will be $27.5 billion if the third appraisal’s average is less than $27.5 billion.

 Disney and Comcast Partnership for Hulu

 A contract for Hulu was signed in 2019 by Disney and Comcast, with an option strike date of January 2024. This arrangement followed Disney’s $71 billion acquisition of Fox’s holdings, which included a minority share in Hulu. Disney already had a 33% share of Hulu, so the transaction gave it majority control over the streaming service. At the time, Comcast held onto its ownership of Hulu because it thought the service’s value would rise sharply by 2024.

After Comcast triggered the deal as part of the 2019 agreement, Disney agreed to take over full control of Hulu and pay Comcast at least $8.6 billion for the remaining 33% ownership in November of last year.

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