Benzinga - by Chris Katje, Benzinga Staff Writer.
A battle between two media giants over the valuation of a leading streaming platform is almost at its end with a deal announced by Walt Disney Co. (NYSE:DIS) to acquire the stake in Hulu it did not already own.
Here are the details.
What Happened: Disney shares struggled in 2023, but the company may have a catalyst or an item that needed more clarity before finally putting it to rest.
On Wednesday, Disney announced it will acquire the 33% stake in Hulu it did not own from NBC Universal, a unit of Comcast Corporation (NASDAQ:CMCSA).
The deal came after Comcast exercised its rights under a put/call arrangement on Nov. 1 that was previously agreed upon. Disney will acquire the stake at fair market value.
According to Disney, the company expects it will pay $8.61 billion to Comcast for the stake based on a floor value of $27.5 billion minus the outstanding capital contributions that NBCU will pay to Disney.
A fair value based on the date of Sept. 30, 2023, will be assessed. If the amount is higher than the guaranteed floor value above, Disney will pay NBCU its percentage of the difference.
Disney anticipated the deal will be completed in the 2024 calendar year.
Related Link: Disney Reports ESPN Financials, Analysts Say The Results Are Intriguing
Why It's Important: Based on the comments from Disney, the company likely believed Hulu would be valued at $27.5 billion or less.
With the deal, Disney would have full ownership of Hulu, a move that could boost its streaming plans. The company owns the Disney+ platform and ESPN+ platform.
Disney ended the third quarter with 105.7 million Disney+ core subscribers. Hulu ended the third quarter with 44 million SVOD subscribers and 4.3 million Hulu Live TV subscribers.
Disney has emphasized growing its direct-to-consumer business, while also exploring potential asset sales of non-core businesses. With the Hulu purchase, streaming is likely to remain a key focus of the company moving forward.
DIS, CMCSA Price Action: Disney shares traded at $81.39 on Wednesday versus a 52-week trading range of $78.73 to $118.18. Shares of Disney are down 23% in the last year.
Comcast shares traded at $41.89 versus a 52-week trading range of $30.04 to $47.46.
Read Next: Disney Delays More Films, Could Shareholders Suffer More Declines During Hollywood Strike?
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