Disney and Comcast seek advisor to resolve Hulu valuation, sources say

By Anirban Sen and Dawn Chmielewski

NEW YORK (Reuters) - Walt Disney and Comcast are seeking to hire a financial adviser to resolve a dispute over how to value the 33% stake in streaming platform Hulu that the former will acquire from the latter, according to people familiar with the matter.

The move is in accordance with a deal the companies struck for Hulu last year. It is an action their contract foresees if JPMorgan Chase, which provided a fairness opinion on Hulu for Disney, and Morgan Stanley, which provided such an opinion for Comcast, are too far apart in their valuation assessments.

JPMorgan has valued Hulu for Disney at close to $27.5 billion, which is the floor valuation for Hulu that the companies had set as part of their 2019 "put-call" agreement, one of the sources said. Morgan Stanley valued Hulu for Comcast at more than $40 billion, another source said.

Disney and Comcast are now in talks to hire an investment bank that will independently value Hulu, the sources said, requesting anonymity because the matter is confidential.

Hulu, which boasts popular original titles such as "Shogun", "The Bear", "Prey", and "Only Murders in the Building", had 49.7 million subscribers at the end of Dec 2023, representing a growth of 2% from the September quarter.

In remarks at a Goldman Sachs conference last year, Comcast CEO Brian Roberts called Hulu a "scarce kingmaker asset" that is "way more valuable today" than when the deal was initially struck.

Disney has already completed the addition of Hulu to its Disney+ streaming service, which is home to titles such as "Moana" and "Frozen."

In regulatory filings last year, Disney and Comcast had outlined that if the valuation reached by their two banks were within 10% of each other, a deal will be consummated at a valuation that is the average of the two appraisals.

Since the two appraisals are more than 10% apart, Comcast and Disney are jointly in talks to pick a third bank to do an independent appraisal, the sources said.

As per the terms of the agreement, if the third appraisal is closest to the valuation of that produced by Disney's bank, the average of those two valuations will be the value at which the deal gets done.

Similarly, if the third appraisal is closest to the valuation of that produced by Comcast's bank, the average of those two valuations is the value at which the deal gets done.

If the average of the third appraisal is below $27.5 billion, the final valuation will be $27.5 billion.

In 2019, Disney and Comcast signed an agreement for Hulu with an option strike date of January 2024, after Disney's $71 billion takeover of Fox's assets, including its minority stake in Hulu. The deal gave Disney majority control over Hulu as it already owned a 33% stake in the streaming service. Comcast retained its stake in Hulu at the time believing that its value would increase significantly by 2024.

In November last year, Disney agreed to take full control of Hulu and pay Comcast at least $8.6 billion for the remaining 33% stake, after Comcast triggered the deal as part of the 2019 agreement.

(Reporting by Anirban Sen in New York and Dawn Chmielewski in Los Angeles; Additional reporting by Milana Vinn; Editing by Chizu Nomiyama)