Walt Disney (DIS) and Comcast (CMCSA) are seeking a financial advisor to mediate their disagreement over the valuation of Comcast's 33% stake in Hulu, which Disney plans to acquire. The companies are working to hire an investment bank that will independently appraise the streaming platform, following divergent assessments provided by their respective advisors, according to insiders. JPMorgan Chase (JPM), valuing Hulu on behalf of Disney, pegged its worth at $27.5 billion—the floor valuation set in the 2019 agreement between the two companies. However, Morgan Stanley (MS), advising Comcast, assessed Hulu's value at over $40 billion.
The valuation dispute arises from a 2019 "put-call" agreement that granted Disney the right to purchase Comcast's stake in Hulu by January 2024. According to the deal, if the valuations from both banks differ by more than 10%, a third bank would be enlisted to resolve the discrepancy. If the third appraisal aligns more closely with Disney's valuation, the final deal will reflect an average of those two figures. Conversely, if the third appraisal is closer to Comcast's valuation, the same averaging principle applies. The agreement also guarantees a minimum valuation of $27.5 billion for Hulu.
Market Overview:
-Walt Disney and Comcast struggle to agree on a valuation for Comcast's remaining stake in Hulu.
-The disagreement triggers a pre-determined clause in their 2019 agreement, leading them to seek a neutral third-party advisor.
Key Points:
-JPMorgan's valuation for Disney places Hulu's worth near the $27.5 billion floor established in 2019.
-Morgan Stanley's valuation for Comcast comes in significantly higher at over $40 billion.
-Disney has already integrated Hulu into its Disney+ platform, bolstering its content library.
-Comcast believes Hulu's value has grown considerably since the initial agreement.
Key Points:
-An independent investment bank will be chosen to provide a neutral valuation of Hulu.
-The final price will be determined based on the average of the two closest valuations (Disney's bank & third-party) or a default of $27.5 billion if all else fails.
-This ongoing dispute could potentially delay Disney's full acquisition of Hulu.
Hulu, which features hit originals like "The Bear," "Prey," and "Only Murders in the Building," had 49.7 million subscribers at the end of December 2023, representing a 2% growth from the prior quarter. Comcast CEO Brian Roberts recently referred to Hulu as a "scarce kingmaker asset," emphasizing that its value has grown significantly since the 2019 deal. Disney has already incorporated Hulu into its Disney+ streaming platform, which boasts popular titles like "Moana" and "Frozen."
Last November, Disney agreed to take full control of Hulu and pay Comcast at least $8.6 billion for its remaining stake. Despite differing valuations, the two media giants are working together to resolve their differences and finalize the deal, which will be pivotal in determining the streaming platform's future direction. With the third-party appraisal on the horizon, the valuation outcome will shape the final transaction value, ensuring fair compensation for both parties while solidifying Disney's streaming strategy.
