Comcast
and
Disney
have accelerated the deadline that will determine the future ownership of Hulu, the streaming service now owned two-thirds by Disney and one-third by Comcast.
Under a five-year old agreement, Comcast (ticker: CMCSA) has the right to put its stake in Hulu back to Disney (DIS)—and Disney has the right to call away the rest of Hulu from Comcast. The original expiration date of that agreement was January 2024, but Comcast CEO Brian Roberts announced Wednesday at the Goldman Sachs Communacopia and Technology Conference in San Francisco that the two parties have now accelerated the target date to start resolving the issue to Sept. 30.
The original agreement between Comcast and Disney set a valuation floor on Hulu of $27.5 billion, but Roberts has continued to argue that the actual valuation of the business is much higher.
Speaking at the Goldman conference Wednesday, Roberts said Hulu is a “great business,” and the second-largest player in subscription-based streaming services, noting that
Netflix
has a valuation of about $200 billion.
The formula for valuing Hulu includes not just the service itself, but also the content included on the service, much of it produced by Disney, Roberts said. He said that in a true auction of Hulu, “there would be bidders lined up around the block.” Roberts notes that the process calls for both sides to hire third-party appraisers, with a third independent appraiser to be added to the mix if the two sides are far apart.
Using Netflix per-subscriber values as a comparable, as Barron’s recently wrote, Hulu would be worth $40 billion, which would mean about $13 billion for Comcast. Hulu, meanwhile, had $10.7 billion in 2022 revenue, a third of Netflix’s. On a comparable revenue basis, Hulu would be worth $65 billion, putting the value of Comcast’s stake above $20 billion.
Roberts didn’t venture a guess on the actual value of Hulu, but said the business is “way more valuable today” than it was when the two sides set the $27.5 billion floor for Hulu five years ago.
Proceeds from the sale of the Hulu stake would be used for share repurchases, with Roberts saying Comcast would accelerate its buyback program by several billion dollars in the second half of calendar 2023.
Wells Fargo analyst Steven Cahall wrote in a research note Wednesday that an accelerated settlement of the Hulu situation could lift a cloud hanging over Disney shares, given other issue like declining linear viewing and subscriber losses in streaming. He adds that Disney’s ultimate streaming strategy is held back as long as Comcast still owns a third of Hulu. “While the Hulu put is a downside to Disney, we see the conclusion as removing an overhang,” Cahall writes.
While Roberts didn’t say when the process might be completed, Cahall writes that investors are likely to conclude that the sale will be finished by year-end.
Comcast shares are 1.6% higher at $45.25. Disney is down 0.5%, to $80.75.
Write to Eric J. Savitz at [email protected]
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