US Markets
Thursday, October 12th, 2023 11:49 pm EDT
Key Points
- Valuation Process: Comcast and Disney have initiated a valuation process for Hulu, a streaming service, as part of a five-year effort to determine its single owner. Comcast owns one-third of Hulu and has enlisted Morgan Stanley, while Disney, the majority owner with two-thirds, has hired JPMorgan Chase to determine the fair value of the service.
- Complex Ownership Agreement: The process is a result of an unusual ownership agreement set up in 2019 after Disney acquired the majority of Fox’s assets. It allows either Comcast or Disney to trigger an option forcing Disney to buy Comcast’s 33% stake in Hulu.
- Accelerated Resolution: The two companies recently agreed to move up the deadline for valuing Hulu from January 2024 to September 30. On November 1, Comcast can compel Disney to acquire its stake, and the valuation will be based on assessments by Morgan Stanley and JPMorgan. If their valuations differ by more than 10%, a third investment bank may be hired for an additional valuation. The process is complex due to Hulu’s subscriber base and considerations of synergy value, and there is no set timetable for the resolution. Comcast plans to return the proceeds from a sale to its shareholders.
Comcast and Disney have taken the next step in their ongoing process of determining the future ownership of Hulu, a popular streaming service. Comcast, which owns a one-third stake in Hulu, has hired Morgan Stanley, while Disney, with a two-thirds ownership, has enlisted JPMorgan Chase to assess the fair value of Hulu. This move is in accordance with an agreement made in 2019, allowing either company to trigger an option that obliges Disney to buy Comcast’s 33% stake.
The complex situation arose after Disney acquired the majority of Fox’s assets in a $71 billion deal, giving Disney majority control over Hulu, where it already held a one-third stake. Comcast initially refrained from selling its stake to Disney, anticipating the increasing value of the streaming industry between 2019 and 2024. However, Comcast also knew it would lose operational control over Hulu’s future, leading to a compromise between the two companies. Under this agreement, Comcast could participate in Hulu’s growth while setting a deadline for Disney to unify ownership and integrate Hulu into its long-term streaming strategy.
The original option strike date was set for January 2024, but recently, the companies agreed to expedite the valuation process, with a new deadline of September 30. On November 1, Comcast can compel Disney to purchase its 33% Hulu stake, a move expected to occur, as confirmed by Comcast CEO Brian Roberts. Morgan Stanley and JPMorgan will then assess Hulu’s value, and if their valuations are within 10% of each other, the average will determine the sale price. The 2019 deal had set a minimum Hulu valuation of $27.5 billion.
In cases where the banks’ assessments differ by more than 10%, Disney and Comcast would jointly hire a third investment bank to provide another valuation, with the sale price determined by averaging this figure with the closest of the previous assessments.
The valuation process is complex due to Hulu’s unique position as a streaming service with 48.3 million subscribers, and considerations of synergy value are involved. Hulu’s ownership by Disney contributes to the growth of Disney+ and ESPN+ subscribers through bundling.
There is no set timetable for the valuation process, but both Disney and Comcast aim for a swift resolution, which prompted the adjustment of the option strike date. Comcast plans to return the proceeds from a sale to its shareholders.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/10/12/comcast-disney-hire-morgan-stanley-jpmorgan-to-value-hulu.html
