Hulu equity valuation is about to be finalized! Disney and Comcast are reportedly hiring a new investment bank to resolve the dispute

According to the financial news app Zhitong Finance, it was reported by media quoting informed sources that the American entertainment industry leader Disney and Comcast are seeking to hire a new investment bank advisor to resolve the significant disagreement on how to value the 33% stake in the streaming platform Hulu. Disney is trying to acquire a 33% stake in Hulu from Comcast to achieve 100% ownership, but there is a huge dispute between the two parties on the valuation issue.

It is understood that this move is in line with the agreement reached by the two entertainment giants last year regarding Hulu. If JPMorgan, providing fair advice to Disney on Hulu, and Morgan Stanley, providing fair advice to Comcast, have significant differences in valuation assessment, as anticipated in their contracts, this will become apparent and a new financial advisor will be needed to handle the valuation.

One source mentioned that JPMorgan's valuation of Disney's Hulu is close to $27.5 billion, which is the minimum valuation set for Hulu in a put-call agreement between the two companies in 2019. Another source mentioned that Morgan Stanley's valuation of Comcast's Hulu exceeds $40 billion.

One source stated that Disney and Comcast are currently negotiating to hire a new investment bank, which will independently assess the value of Hulu.

Data shows that as of the end of December 2023, Hulu, one of the streaming giants with popular original series or exclusive programs such as "Shogun," "Ted Lasso," "Prey," and "Only Murders in the Building," has a user base of up to 49.7 million, an increase of about 2% compared to the fourth quarter of last year. Hulu also focuses on producing high-quality and critically acclaimed series, such as "House," "American Horror Story," and "Dose of Addiction."

Last year, Comcast CEO Brian Roberts described Hulu as a "scarce king-level asset" during a speech at a Goldman Sachs conference. The value of Hulu today is much higher compared to when the initial deal was made.

Disney has already integrated Hulu into its global largest streaming service platform, Disney+, which is the home of Marvel superhero movies like the "Avengers" series, as well as films like "Moana" and "Frozen," and classic IPs.

In documents submitted to regulatory authorities last year, Disney and Comcast stated that if the difference in valuation between the two banks is within 10%, the transaction will be completed at the average of the two banks' valuations.

However, sources indicate that due to the significant gap in valuation between the two assessments, far exceeding 10%, Comcast and Disney are in joint negotiations to select a third investment bank for an independent assessment.

According to the agreement terms, if the third assessment is closest to the valuation given by Disney's bank, then the average of Disney's two valuations will be the value at which the transaction is completed. Similarly, if the third assessment is closest to the valuation given by Comcast's bank, then the average of Comcast's two valuations will be the value at the completion of the transaction In addition, if the average valuation of the third assessment is lower than $27.5 billion, the final valuation will be locked in at $27.5 billion.

It is understood that as early as 2019, Disney and Comcast signed an agreement regarding Hulu, with the exercise date of the option set for January 2024. Prior to this, Disney acquired Fox's assets for $71 billion, including its minority stake in Hulu. This deal gave Disney majority control of Hulu, as Disney already owned 33% of the streaming service, bringing Disney's total stake to 67%. Comcast retained its stake in Hulu at that time, believing that its value would increase significantly by 2024.

In November last year, Disney agreed to fully acquire 100% ownership of Hulu and pay Comcast at least $8.6 billion to purchase the remaining 33% stake. Comcast had facilitated this deal as part of the 2019 agreement, but valuation disputes have delayed the transaction from being finalized