Disney Could Owe an Additional $5 Billion for Hulu if 3rd-Party Appraisal Jibes with NBCU's Valuation

Should a third-party appraisal of Hulu match NBCUniversal's valuation for the streaming platform, Disney will have to come up with an additional payment of as much as $5 billion to finally close its purchase of NBCU's 33% stake in the former joint venture, a Disney's 10-Q filing on Tuesday revealed.

Last November, Disney made what was an initial payment of $8.61 billion to NBCU to acquire the last remaining share of Hulu it didn't already own. That amount covered one-third of a $27.5 billion "floor valuation" of Hulu. The two sides agreed to more precisely appraise Hulu's value to determine if Disney owed more than that.

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Unable to agree on a valuation, Disney and NBCU in May decided to abide by a third-party appraisal of Hulu.

"During the initial phase of the appraisal process, [Disney's] appraiser arrived at a valuation that falls below the guaranteed floor value, while NBCU’s appraiser arrived at a valuation substantially in excess of the guaranteed floor value," Disney said in its SEC filing.

"Once the arbitration is completed, determination of the final equity fair value will take into account the valuation of a third appraiser pursuant to the appraisal process as resolved by the arbitration. As such, if the third appraiser’s equity fair value determination were equal to or below the guaranteed floor value, the Company would not be required to pay NBCU any additional amount. Conversely, if NBCU’s appraisal were deemed to be valid and the third appraiser’s equity fair value determination were consistent with the NBCU’s appraiser’s valuation, [Disney] would be required to pay NBCU an additional amount of approximately $5 billion as its share of the difference between the equity fair value and the guaranteed floor value. If the third appraiser’s equity fair value determination were between the valuations of the [Disney's] and NBCU’s appraisers, the incremental amount would likewise be between zero and approximately $5 billion."

Hulu had 51.1 million subscribers as of the end of June, up 2% year over year.