For months, speculation has swirled that AT&T (NYSE: T) would sell off its stake in popular video-streaming platform Hulu. The telecommunications and media behemoth found itself owning 9.5% of Hulu following its acquisition of Time Warner last year, a deal that substantially added to Ma Bell's debt load. Elsewhere in media megamergers, Disney (NYSE: DIS) just closed its own acquisition of Twenty-First Century Fox's entertainment assets, which gave it majority ownership of Hulu.
AT&T has just pulled the trigger on selling its stake.
Paying down debt
AT&T and Hulu announced yesterday that they have reached an agreement for AT&T to sell its minority stake back to Hulu. The deal values Hulu at $15 billion, which means AT&T got $1.43 billion for its 9.5% stake. Government or third-party approvals weren't necessary, and the deal immediately closed upon signing.
"We thank AT&T for their support and investment over the past two years and look forward to collaboration in the future. WarnerMedia will remain a valued partner to Hulu for years to come as we offer customers the best of TV, live and on demand, all in one place," Hulu CEO Randy Freer said in a statement.
T Total Long Term Debt (Quarterly) data by YCharts .
AT&T says it will use the proceeds to pay down debt, which stood at a whopping $176.5 billion at the end of 2018.
Two down, one to go
Hulu was originally created as a joint venture between Disney, Time Warner, Fox, and Comcast (NASDAQ: CMCSA) . Two of these partners have now sold off their stakes in one way or another, leaving just Disney and Comcast. Following AT&T's exit, Disney now owns two-thirds of Hulu, with Comcast owning the remaining third. Given Hulu's current valuation, Comcast's stake is worth $5 billion.
Disney has made it clear that it hopes to bundle its growing portfolio of over-the-top (OTT) streaming services, ESPN+ and Disney+. The House of Mouse finally announced details about Disney+ last week, saying it will be priced aggressively at just $7 per month. Hulu recently cut the price of its most popular plan to $6 per month. In an interview with Bloomberg just days after the Disney+ unveiling, CEO Bob Iger discussed bundling and buying out partners:
When asked directly about buying all of Hulu, Iger responded, "We'll see. We've been in conversations with both partners about that possibility, but it's still a little early to speculate." Perhaps it wasn't too early to speculate after all.
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Evan Niu, CFA owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy .
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
