Walt Disney Co (DIS). could face an additional $5 billion payout to Comcast (CMCSA) for its stake in Hulu, pending the outcome of an independent appraisal. The companies hired RBC Capital (RBC) to value the 33% stake in the streaming platform amid a dispute over its worth. Comcast believes Hulu is worth over $40 billion, significantly higher than Disney's valuation, potentially leading to a costly resolution.
The appraisal process follows a 2019 agreement giving Disney the option to buy out Comcast's stake in January 2024. Disney already owned a majority stake after acquiring 21st Century Fox's assets for $71 billion. The ongoing arbitration is set to conclude by fiscal 2025, determining whether Disney will need to pay more than the $8.6 billion already disbursed for the remaining stake.
Market Overview:
- Disney could owe an extra $5 billion for Comcast's Hulu stake.
- RBC Capital is the independent appraiser for the valuation.
- Dispute resolution expected by fiscal 2025.
Key Points:
- 2019 agreement gave Disney an option to buy in 2024.
- Disney valued Hulu below $27.5 billion; Comcast at $40.8 billion.
- Potential payout depends on the independent appraisal.
Looking Ahead:
- Outcome of RBC's appraisal critical for final payout.
- Impact on Disney's financials if additional payment is required.
- Long-term strategy for Hulu under Disney's full control.
The initial agreement between Disney and Comcast included a valuation floor of $27.5 billion. If RBC's valuation matches or falls below this figure, Disney will not have to pay more than the $8.6 billion already settled. Conversely, a higher appraisal consistent with Comcast's $40.8 billion valuation would necessitate an additional $5 billion payment from Disney.
Disney's decision to control Hulu came after acquiring Fox’s (FOX) assets, giving it a strategic advantage in the streaming wars. As negotiations continue, the final valuation by RBC will play a pivotal role in determining the financial obligations and future of Hulu under Disney's stewardship. The conclusion of this arbitration will be closely watched, potentially setting a precedent for future media and entertainment acquisitions.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
