Disney Needs $5B More for Hulu Stake

Walt Disney announced on Wednesday that it may be required to pay up to an additional $5 billion for Comcast’s minority stake in Hulu, contingent upon an appraiser endorsing Comcast’s valuation exceeding $40 billion

Disney and Comcast engaged investment bank RBC Capital as the independent appraiser to resolve a disagreement regarding the valuation of the 33% stake in the streaming platform earlier this year, according to individuals with knowledge of the situation.

In May, Reuters was the first to disclose that Disney and Comcast were in the process of hiring an independent adviser.
The dispute has been resolved through arbitration proceedings between the two parties, and a definitive decision is anticipated in fiscal 2025.

In 2019, Disney and Comcast executed an agreement for Hulu with an option strike date of January 2024. This agreement was executed after Disney’s $71 billion acquisition of Fox’s assets, which included its minority stake in Hulu.

Disney acquired the dominant stake in Hulu due to the agreement, as it already held a 33% stake. At the time, Comcast maintained its stake in anticipation of a substantial increase in its value by 2024.

After Comcast initiated the 2019 agreement, Disney agreed to acquire control of Hulu and compensate Comcast for the remaining 33% stake, with a minimum of $8.6 billion. This agreement was reached in November of last year.

Disney announced on Wednesday that it would not be required to reimburse Comcast for any amount exceeding the $8.6 billion it paid out last year if the independent adviser’s valuation is equal to or lower than the guaranteed floor value of $27.5 billion.

Disney will be required to pay Comcast an additional $5 billion if RBC’s appraisal aligns with Comcast’s assessment. Disney would be required to pay between $0 and approximately $5 billion if the assessment falls within the range of the previous assessments conducted by both parties.

Hulu was valued at less than $27.5 billion by JPMorgan, Disney’s adviser on this transaction, which is the floor valuation the companies had established in their 2019 “put-call” agreement.

Morgan Stanley, Comcast’s advisor, assessed Hulu at $40.8 billion.

Disney and Comcast had stated in regulatory filings last year that a transaction would be executed at a valuation, which is the average of the two appraisals if the valuations reached by their banks were within 10% of each other.

Comcast and Disney selected RBC to conduct an independent appraisal because the two were more than 10% apart.