Later this year, Disney is planning on adding Hulu content into Disney+ in the United States, as part of its one-app experience, before eventually merging the two apps together in the future, once it has completed its purchase of the 33% stake in Hulu that Comcast owns.
Back in 2019, Disney and Comcast made an agreement, which allowed Disney to have operational control over the streaming platform and that in 2024, either company could force Disney to buy out Comcast’s stake. Hulu will have to be valued by an independent company, though the agreement in 2019 valued Hulu at a minimum price of $27 billion, so the least Comcast would get in 2024 would be around $9 billion, though there was a clause in the contract that stated if Comcast didn’t continue to fund Hulu, its stake would drop down to a minimum of 21%, which was valued at $5.8 billion.
With Disney going on a cost-cutting exercise to save over $5 billion this summer and with the company generally struggling on many different levels, many have been wondering if Disney has enough money to buy out Comcast’s stake.
During this week’s quarterly investors call, Disney’s Interim Chief Financial Officer, Kevin Lansberry, was asked about how Disney is going to pay for its one-third stake in Hulu, to which he replied:
I’ll remind everyone that the floor to that put is about $9.2 billion. We’re very comfortable with our current liquidity position. We’ve got about $11.5 billion of cash on our balance sheet, got about $10.5 billion worth of revolving credit facilities and commercial paper.
And so we — and we’re going to have plenty of future cash flow to help fund all of this going forward. I would also like to note that from a balance sheet perspective, we’ve got a strong single A credit rating that reflects the strength that we see in our balance sheet. We made significant progress recently, deleveraging coming out of the pandemic. We’re prioritizing free cash flow as a company.
And we’re being really disciplined and smart about how we go about allocating capital across the company. And last but not least, as I noted in my prepared remarks, we hope to still be in a position — or we plan to still be in a position at the end of this year to recommend to the board of directors that we put a modest dividend out.
More details on the eventual purchase of Comcast’s stake were also revealed in the SEC filing, stating:
“The Company and NBCU have been conducting a confidential arbitration concerning the parties’ rights and responsibilities under the Hulu limited liability company agreement. The Company expects a decision in that arbitration within the next quarter. The outcome of the arbitration is uncertain and we cannot reasonably estimate the amount of any potential loss or the impact on the determination of the value of Hulu’s equity pursuant to the Hulu limited liability company agreement and thus the amount we may be required to pay to acquire NBCU’s interest in Hulu.”
With a decision not yet been made on the value of Hulu, it’s likely this is a reason why the launch of Hulu content within Disney+ is going to happen much later this year, but ultimately, within the next few months, we will have a clearer outlook and then things can get moving. The clock is clicking down to 2024 and Disney would never have announced its plans for merging Hulu and Disney+ together, had they not been confident they could pay for it.
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