Hulu valuation dilemma: Third-party to decide price tag?

Walt Disney and Comcast are reportedly locked in a disagreement over the valuation of Hulu. The issue stems from Disney's plan to acquire Comcast's 33 percent stake in the streaming platform, a move agreed upon last year. Their contract included a provision for a neutral third-party valuation if the initial assessments by each company's chosen banks differed significantly.

As per a Reuters report, JP Morgan Chase has valued Hulu for Disney at around $27.5 billion, while Morgan Stanley, representing Comcast, placed the value at over $40 billion.

To bridge this gap, Disney and Comcast are now searching for an independent investment bank to provide a neutral valuation of Hulu. This valuation will determine the final price Comcast receives for its stake in the streaming giant.

The significant difference in valuations highlights the current volatility within the streaming service industry. While Disney is likely seeking a more conservative price, Comcast is aiming to capitalise on the perceived growth potential of Hulu. The involvement of a third-party advisor is expected to bring a resolution to the matter.

On November 1, 2023, The Walt Disneyannounced today that it will acquire the 33 percent stake in Hulu, LLC held by Comcast Corp.’s NBC Universal (NBCU), following Comcast’s exercise of its right under the put/call arrangement between the two companies.

Under the terms of the put/call arrangement, by December 1, Disney expected it will pay NBCU approximately $8.61 billion, representing NBCU’s percentage of the $27.5 billion guaranteed floor value for Hulu that was set when the companies entered into their agreement in 2019 minus the anticipated outstanding capital call contributions payable by NBCU to Disney.

Under the appraisal process agreed to by Disney and Comcast, Hulu’s equity fair value will be assessed as of September 30, 2023, and if the value is ultimately determined to be greater than the guaranteed floor value, Disney will pay NBCU its percentage of the difference between the equity fair value and the guaranteed floor value.