Disney to Purchase Remaining Hulu Stake From Comcast, Expects to Pay at Least $8.61 Billion

Disney will buy the remaining Hulu stake from Comcast, the company announced on Wednesday, an acquisition that will further Disney’s focus on streaming.

The company said it expects to pay at least $8.61 billion for Comcast’s 33% stake in Hulu. This number also represents NBC Universal’s percentage of the $27.5 billion guaranteed floor value for Hulu, which the companies entered into when they first made their Hulu agreement in 2019. Subtracted from this number is the anticipated outstanding capital call contributions that will be payable by NBCU to Disney.

Comcast has signaled it expects the valuation of Hulu to be higher than what Disney is hoping to pay, making the appraisal process key. Hulu’s equity fair value will be assessed as of September 30, 2023. If this value is greater than the guaranteed floor value, Disney will pay NBCU a percentage of the difference between the equity fair value and the guaranteed floor value.

If Disney and Comcast can’t agree on Hulu’s fair market value, each company will hire an investment bank to make a determination. If the two determinations are not within 10% of each other, then the two banks will hire a third firm, in which case the equity fair value shall be the average of the two determinations that are closest in value to each other.

According to an SEC filing, the appraisers will base the valuation on factors including “Hulu’s historical financial and operating results, which shall be based solely on audited financial statements; that Hulu is valued as a going concern, carrying on its existing business activities; and Hulu’s future business prospects and projected financial and operating results, assuming that the assets, contract rights and intellectual property used in Hulu’s business that are provided by Disney will be continued and available to Hulu in a manner and on terms consistent with past practice.”

“We look forward to the appraisal process and the determination of Hulu’s fair market value which we expect will reflect the extraordinary value of the business,” a spokesperson for Comcast said in a statement.

Though the timing of the appraisal process is currently uncertain, Disney anticipates it will be completed during the 2024 calendar year. Under the terms of the initial 2019 put/call agreement, Disney was allowed to buy out the stake as early as January 2024 and Comcast could require that Disney do so.

In September, Comcast CEO Brian Roberts revealed that the two parties had revised the agreement, allowing the process to determine Hulu’s value to be initiated as early as September 30. At the time, Roberts estimated that the process would take roughly 30 days and that all the synergies around the “scarce kingmaker asset” could be worth $30 billion before even ascribing value to Hulu itself.

Comcast plans to return the proceeds of the sale to shareholders. A portion of this is expected to be accomplished in 2023. The company also plans to increase spending in its businesses.

“We’ve increased the run rate by several billion dollars for the remaining two quarters of the year, which really is a reflection of our confidence in the anticipated outcome and of the valuation process and the strength of our underlying business,” Roberts told the Goldman Sachs Communacopia and Technology Conference.

The latest update comes as Disney CEO Bob Iger has said that Disney+ and Hulu would be combined into one app offering by the end of the year.

As Hulu’s subscriber numbers have grown recently, Disney+’s have shrank. Hulu reported a total of 48.3 million subscribers during Disney’s third quarter of 2023, an increase of 100,000 compared to the previous quarter. The figure included 44 million SVOD only subscribers, an increase of 300,000 compared to the previous quarter, and 4.3 million Live TV and SVOD subscribers, a decrease of 100,000. Hulu SVOD only ARPU increased from $11.73 to $12.39 due to higher per-subscriber advertising revenue, while Hulu Live TV + SVOD ARPU decreased from $92.32 to $91.80.

Meanwhile, Disney+ reported a total of 146.1 million subscribers for the quarter, a decrease of 11.7 million from 157.8 million in the previous quarter. The figure included 105.7 million core subscribers, including 46 million in the U.S. and Canada, a decrease of 300,00o from the previous quarter, and 59.7 million international subscribers (excluding Disney+ Hotstar), an increase of 1.1 million. Disney+ Hotstar subscribers fell to 40.4 million from 52.9 million in the previous quarter, a decrease of 12.5 million.

Disney expects Disney+ to be profitable in fiscal year 2024. The company will report its earnings for the fourth quarter of 2023 on November 8 after the bell.

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