Nov 2, 2023

Disney Purchases Comcast's Hulu Stake, Becomes Sole Owner of Platform

The Walt Disney Company has agreed to acquire an additional 33% stake in Hulu, currently held by Comcast Corporation's NBCUniversal (NBCU), making it the sole owner of the streaming platform. [Since taking over as CEO of Disney last November, Bob Iger has been much more focused on streaming than traditional broadcast television. Rumors abound that Disney is looking to sell its linear channels and convert ESPN to a digital platform; during an earnings call in May, Iger said that Disney will soon launch a "one-app experience" in the U.S. that will allow Hulu and Disney+ content in the same place. Full ownership of Hulu is the most important step Disney can take in that direction.

The cost to Disney - According to a brief release issued by Disney on Wednesday, the company will pay at least $8.61 billion for its stake in Comcast on December 1. [The $8.61 billion figure is a floor value set when Disney and Comcast signed a joint ownership agreement in 2019 and is subject to change before the deal is finalized. The deal still requires an appraisal process, which Disney expects to be completed by the end of 2024. Final pricing will be determined at the conclusion of that process.

Appraisal Mechanism-Hulu's fair value is appraised by financial firms JP Morgan Chase (representing Disney) and Morgan Stanley (representing Comcast). If the two lines' numbers do not fall within 10% of each other, a third valuer will make another estimate; Hulu's final valuation will be set as the average of the two closest figures.

What happens if the price goes up - according to Disney, if the appraisal comes up with a higher number, "Disney will pay NBCU a percentage of the difference between the market value of the stock and the guaranteed floor amount ($86.1B)."

Is Hulu worth more now than in 2019 - In 2019, Hulu was valued at $27.5B. Comcast believes the streamer is worth far more now. This September, Comcast CEO Brian Roberts suggested that the 2019 figure was "hypothetical" and that the final price could be much higher. In a previous earnings call, CEO Roberts claimed that Hulu is "the number two AVOD/SVOD service behind Netflix; the number one company (Netflix) has a valuation of $200 billion in today's market."

The company's "number one company (Hulu) is valued at $200 billion.

What the companies are saying about Wednesday's announcement - Disney's release was mostly legalese, but the company explained: "Acquiring Comcast's stake in Hulu at fair market value will further Disney's streaming objectives.

Comcast issued its own statement: "We look forward to the appraisal process and the determination of fair market value for Hulu.