A deal two years in the making could still pay out as The Walt Disney Company’s buyout of Comcast’s share of Hulu is under dispute. In 2023, Disney acquired Comcast/NBCUniversal’s 33% stake in Hulu for $8.61 billion to take full control of the streaming service. Now, Disney may have to open up the wallet payout more, according to a report from Variety.
The problem arises with the two conglomerates not being able to agree on Hulu’s fair market value. Their initial negotiations began in 2019, and when the deal was closed, the 33% stake was a third of Hulu’s $27.5 billion guaranteed floor value. The two companies are disputing after Disney’s third-party appraiser “arrived at a valuation that falls below the guaranteed floor value, while NBCU’s appraiser arrived at a valuation substantially in excess of the guaranteed floor” according to Disney’s 10-Q filed with the SEC for the Q3 of 2024.
The reason Disney may have to pay more is due to the differences in the appraisal value, according to the Variety report:
Per the companies’ agreement, if the two sides’ valuations were not within 10% of each other, the banks they enlisted for the transaction would pick a third firm to make another estimate, and Hulu’s final valuation will be the average of the two figures that are closest to each other.
Disney’s filing has more details about the process after arbitration:
Once the arbitration is completed, determination of the final equity fair value will take into account the valuation of a third appraiser pursuant to the appraisal process as resolved by the arbitration. As such, if the third appraiser’s equity fair value determination were equal to or below the guaranteed floor value, the Company [Disney] would not be required to pay NBCU any additional amount. Conversely, if NBCU’s appraisal were deemed to be valid and the third appraiser’s equity fair value determination were consistent with the NBCU’s appraiser’s valuation, the Company [Disney] would be required to pay NBCU an additional amount of approximately $5 billion as its share of the difference between the equity fair value and the guaranteed floor value. If the third appraiser’s equity fair value determination were between the valuations of the Company’s [Disney] and NBCU’s appraisers, the incremental amount would likewise be between zero and approximately $5 billion.
It has been a busy news week for Hulu after Disney released their SEC filings. The Hulu+Live TV streaming service lost 100,000 subs, however, with consumers shifting to on-demand content, Hulu on-demand gained 900,000 over the quarter. Even with the loss and gain of subs, respectively, Hulu’s prices are increasing for on-demand and live TV subscribers.
Subscribers to Hulu + Live TV will see their subscription rise $6, from $76.99 to $82.99 on October 17, 2024, and around the same time, Hulu, Disney+, and ESPN+ subscribers will each see an increase.
Check out more details in the following video.
