The Walt Disney Company (NYSE:DIS) has formally commenced the process of acquiring the remaining 33% stake in streaming service Hulu, held by Comcast’s (NASDAQ:CMCSA) NBCUniversal. The company said that under a put/call arrangement, it will pay NBCUniversal about $8.6 billion by December 1. The move will give Disney full ownership of Hulu and aligns with the company’s strategy to integrate Hulu into its flagship Disney+ streaming service.
Disney on Track to Fully Own Hulu
Disney explained that the $8.6 billion payment represents NBCUniversal’s percentage of the $27.5 billion guaranteed floor value for Hulu that was determined as per a 2019 agreement. On November 1, Comcast exercised its option under the agreement to sell the Hulu stake held by NBCUniversal to Disney.
Disney added that an ongoing appraisal process will assess Hulu’s equity fair value. The company will have to pay NBCUniversal an additional amount if the equity fair value exceeds the guaranteed floor value under the 2019 agreement. Disney expects the appraisal to be completed in 2024. Comcast believes that Hulu’s worth is way more than what it was when the agreement was signed. It expects the appraisal process to reflect the “extraordinary value” of Hulu.
Disney’s Efforts To Boost Business
Disney secured a controlling stake in Hulu through its $71 billion acquisition of 21st Century Fox’s film and television businesses in 2019. Currently, Hulu ranks among the few profitable streaming players and had 48.3 million subscribers as of July 1, 2023 (Disney’s fiscal third quarter). Meanwhile, Disney+ had 146.1 million subscribers as of July 1.
Disney CEO Bob Iger had previously indicated that the company intends to combine Hulu’s content with that of Disney+, with the goal of offering users a “one-app experience.” In September, the company launched a new bundled offering that combines its Disney+ service and Hulu, without ads, for $19.99 a month.
Iger is also looking for potential partnerships for ESPN and is evaluating other strategies, as he is trying to streamline the company amid a proxy battle with activist investor Nelson Peltz.
What is the Target Price for DIS Stock?
Wall Street is cautiously optimistic on Disney, with a Moderate Buy consensus rating based on 18 Buys, five Holds, and one Sell. The average price target of $106.10 implies 31% upside potential. DIS shares have declined over 7% year-to-date.
