Disney Might Owe $5 Billion More for Comcast’s Hulu Stake

Walt Disney has announced that it may need to pay up to an additional $5 billion to acquire Comcast’s minority stake in Hulu. This potential extra cost hinges on the decision of an appraiser, who may agree with Comcast’s valuation that places Hulu’s worth at over $40 billion.

Both Disney and Comcast have engaged RBC Capital as an independent appraiser to settle the ongoing dispute about the value of Comcast’s 33% stake in the streaming platform. Earlier in the year, Reuters reported that the two companies were in the process of hiring an independent adviser to find a fair value.

The arbitration proceedings have already begun, and a final decision is expected in fiscal 2025. The background to this dispute dates back to 2019, following Disney’s $71 billion acquisition of Fox’s assets, which included a minority stake in Hulu. This deal gave Disney the majority control of Hulu, as it already owned a 33% stake, leaving Comcast with the remaining minority stake anticipating that its value would significantly rise by 2024.

Last November, Disney confirmed its intention to gain complete control over Hulu and agreed to pay Comcast at least $8.6 billion for the remaining 33% stake, adhering to a 2019 agreement. Per the terms of this agreement, if the independent adviser’s valuation of Hulu is equal to or falls below $27.5 billion—the guaranteed floor value—Disney wouldn’t need to shell out more than the prior $8.6 billion payout. However, if RBC’s appraisal matches Comcast’s higher valuation, Disney will be looking at an additional $5 billion payment. Should the valuation fall somewhere between the initial assessments from both parties, Disney may have to pay anywhere between $0 and $5 billion.

JPMorgan, advising Disney, has estimated Hulu’s value at less than $27.5 billion, which aligns with the floor valuation set in their 2019 “put-call” agreement. On the other hand, Comcast’s adviser, Morgan Stanley, valued the streaming platform at $40.8 billion. Last year, in regulatory filings, both companies disclosed that if the valuations from their respective banks were within 10% of each other, a deal would be made at a valuation averaged from the two appraisals. Given the more than 10% disparity, RBC was selected for the independent evaluation.

Source: Reuters