Disney may have to pay $5 billion more for Comcast’s Hulu stake to settle the dispute

Walt Disney said Wednesday it may have to pay up to $5 billion more to buy Comcast’s minority stake in Hulu if an appraiser agreed with Comcast’s assessment that the stake should be valued at more than $40 billion. .

Earlier this year, Disney and Comcast hired investment bank RBC Capital as an independent valuer to resolve a dispute over how to value a 33% stake in the streaming platform, according to people familiar with the matter.

Reuters first reported in May that Disney and Comcast were looking to hire an independent counsel.

The two sides have entered into arbitration proceedings to resolve the dispute, and a final decision is expected in fiscal year 2025.

Disney and Comcast signed a deal for Hulu in 2019 with an option strike date of January 2024, following Disney’s $71 billion acquisition of Fox assets, including its minority stake in Hulu.

The deal gave Disney majority control over Hulu as it already owned a 33% stake. Comcast held onto its stock at the time, believing its value would rise significantly through 2024.

In November of last year, Disney agreed to take control of Hulu and pay Comcast at least $8.6 billion for the remaining 33% stake, after Comcast triggered the deal as part of the 2019 deal.

Disney said Wednesday that if the independent counsel’s assessment is equal to or below the guaranteed value of $27.5 billion, it will not have to pay Comcast anything more than the $8.6 billion it paid last year.

If RBC’s valuation matches Comcast’s valuation, Disney will have to pay Comcast $5 billion more. If it falls between previous estimates from both parties, Disney will have to pay anywhere between $0 and about $5 billion.

JPMorgan, Disney’s adviser on the deal, valued Hulu at less than $27.5 billion, which is the base valuation the companies had set in their 2019 put-call deal.

Morgan Stanley, which is an adviser to Comcast, valued Hulu at $40.8 billion.

In regulatory filings last year, Disney and Comcast had said if the valuation reached by their banks was within 10% of each other, a deal would be made at a valuation that is the average of the two valuations.

Since it was more than 10% away, Comcast and Disney chose RBC to conduct an independent evaluation.