Disney has agreed to acquire the remaining 33% stake in Hulu from the Comcast company NBCUniversal for at least $8.61 billion. It could come to significantly more than that. In any case, it will be a cash boost for Comcast. Disney says that the acquisition of the stake at fair market value will further its online video objectives.
Under a previous agreement, Disney expects that it will pay NBCUniversal approximately $8.61 billion by the start December, representing its third of the $27.5 billion guaranteed floor value for Hulu that was set when the companies entered into their agreement in 2019, less certain capital contributions payable to Disney.
The fair equity value of Hulu will be assessed as of the end of September 2023, and if the value is ultimately determined to be greater than the guaranteed floor value, Disney will pay NBC Universal its percentage of the difference between the equity fair value and the guaranteed floor value.
Hulu was originally launched in 2007 as a joint venture between News Corporation, NBCUniversal, and a private equity company, later joined by The Walt Disney Company, which owns ABC.
Disney gained majority control of Hulu through its acquisition of Fox in a $71 billion deal. Comcast, which owned the remaining shareholder NBC Universal, declined to sell its stake but a deal was agreed that it could benefit from the assumed appreciation of the value of the business over the next five years.
As that deadline approached, the two companies agreed to move the valuation date forward to the 30 September 2023.
The companies have each hired investment banks to determine the valuation. It they come to valuations within 10% of each other, the average valuation will be used, otherwise a third valuation will be made, with the sale price based on splitting the difference with the closest of the other valuations. The appraisal process is expected to be completed during 2024.
Brian Roberts, the chief executive of Comcast has claimed that Hulu was worth $60 billion, suggesting that any valuation should include the synergy value of the combination with Disney+ and ESPN+.
Bob Iger, who returned to Disney as chief executive, has said that Hulu was not essential to the company, calling its programming undifferentiated, which makes one question why Disney would want to bundle it with its own subscription services.
Hulu has over 48 million subscribers, including 4.3 million paying for its live television service at an average of about $92 a month.
Disney+ has 46 million subscribers in the United States and Canada, and nearly 60 million internationally, excluding another 40 million with Hotstar.
The Disney direct-to-consumer business has yet to make a profit. In the last quarter it reported an operating loss of half a billion dollars, although that was an improvement on the billion dollar loss the same quarter the previous year.