Comcast and Disney have modified their Hulu agreement to enable the expected buyout of Comcast’s one-third stake in the streamer to begin on September 30 instead of next January.The news was shared at a Goldman Sachs conference appearance by Comcast CEO Brian Roberts, who said the initial minimum valuation of $27.5 billion for Hulu agreed to in 2019 was “just a hypothetical.” He suggested the final price tag could be much higher. Roberts said both companies “wanted to get this behind us,” so they reached an agreement last week to accelerate the timeline.On September 30, Disney can “put” and Comcast can “call,” which starts the process of the one-third stake moving to Disney. Each company will have its own appraiser and then there will be third-party appraisers, so the process could take some time. Roberts said both companies “are well-served to have clarity for investors about what this really means,” so it shouldn’t drag on too long.The put/call provision was part of the 2019 operational takeover of Hulu by Disney in 2019 in the wake of the $71.3 billion acquisition of most of 21st Century Fox. Founded in 2007, Hulu was always a joint venture, in its later years among Fox, Disney and Comcast/NBCUniversal. While Disney and Comcast have publicly floated the scenario of Comcast buying out Disney’s share, the process has followed the more widely expected path of Disney rolling up full control.Roberts emphasized that the $27.5 billion minimum valuation “that people have bandied about was just a hypothetical” and will likely to end up far higher. Hulu is “a scarce, kingmaker asset,” he asserted, and worth “way more today than it was” when the parties agreed to the five-year timeline.“Netflix and Hulu are in a class by themselves” as stand-alone streaming outlets, Roberts said. Citing Nielsen data, he said engagement on Hulu is “two to three times” that of rival streamers except for Netflix.In addition to that value, Roberts said the importance of Hulu is in its synergy and bundling capabilities. As part of Disney’s streaming strategy, its presence “reduces churn by half” on other platforms.Roberts said the appraisal process is a new one in all of the decades he has been at the family-run company. As stipulated by the contract with Disney, the appraisal assumes that Hulu would be sold on the open market. “No one’s ever sold or auctioned off” a property like Hulu, Roberts said. “The key, more than Hulu, is that you get all the content and all of the bundling. And you have synergy as the buyer.”The synergy and churn benefit alone could be worth $30 billion to the buyer in a hypothetical open auction, Roberts said, a number separate from the streaming service itself. Were it to go up for sale, “there would be a line of bidders around the block,” Roberts said. “Usually, in robust auctions, the seller gets all of the benefits.” 10-Comcast execs are “excited to get this resolved,” Roberts said. The company has already increased its run rate by “several billion dollars” for the last two quarters of 2023, which “really is a reflection of our confidence in the anticipated outcome, and the valuation process.” Share buybacks will be increased by several billion dollars, a move designed to return the proceeds from the Hulu stake sale to investors.
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