DEFM14A: FuboTV and Hulu Live Merge: Disney Takes Control

FuboTV Inc. announces a definitive agreement to combine its business with Hulu's Live TV segment, resulting in Disney-controlled Hulu holding a 70% economic and voting interest in the combined entity, Newco.

Summary

• FuboTV Inc. (Fubo) will combine its business with the Hulu Live Business, a segment of The Walt Disney Company (Disney) and Hulu, LLC, through an Up-C reorganization.
• Post-transaction, Hulu will hold a 70% economic interest in Newco (the combined entity) and a 70% voting interest in Fubo, while Fubo will hold a 30% economic interest in Newco.
• Fubo will remain a publicly traded company on the NYSE under the ticker FUBO and will serve as the sole managing member of Newco.
• The transaction includes a $220 million cash payment to Fubo upon execution of the Business Combination Agreement and Settlement Agreement, which is not contingent on the transaction's closing.
• An affiliate of Disney has committed to provide Fubo with a senior unsecured term facility of up to $145 million, available January 5, 2026, for general corporate purposes and to repay Fubo's 2026 Convertible Notes.
• The transaction also settles Fubo's antitrust lawsuit (2024 Litigation) against Disney, Fox Corporation, and Warner Bros. Discovery, Inc. with prejudice.
• Fubo will convert from a Florida corporation to a Delaware corporation immediately prior to closing, with existing Fubo Common Stock converting to Class A Common Stock.
• A Tax Receivables Agreement will be established, obligating Fubo to pay Hulu a percentage (up to 70%) of certain tax benefits realized from Fubo's historic net operating losses and tax basis adjustments.

Sentiment

Score: 6

Explanation: The filing presents a strategic transaction with significant potential benefits, including capital infusion and litigation settlement, which are positive. However, it also highlights substantial dilution for existing shareholders and the company becoming a 'controlled company,' along with inherent integration and market risks, leading to a moderately positive but cautious sentiment.

Positives

• Fubo receives a $220 million cash payment upfront, providing immediate liquidity.
• A Disney affiliate commits to a $145 million senior unsecured term facility, enhancing Fubo's capital resources and addressing near-term debt obligations.
• The transaction includes the settlement of Fubo's 2024 antitrust litigation against Disney and other media companies, removing significant legal uncertainty and costs.
• Fubo gains the right to offer a new Sports & Broadcast service featuring Disney's sports and broadcast networks (ABC, ESPN, ESPN2, ESPNU, SECN, ACCN, ESPN+), expanding its content offering.
• The combination is expected to generate meaningful annual cost and revenue synergies through content cost savings, advertising optimization, sales and marketing opportunities, and other operational efficiencies.
• Fubo will benefit from the resources and support of Hulu (a Disney subsidiary) post-closing.
• Reincorporation to Delaware is expected to enhance corporate governance clarity and attract future board candidates due to Delaware's comprehensive corporate laws and specialized court system.
• Fubo's existing management team will continue to lead the combined entity.

Negatives

• Existing Fubo shareholders will experience significant dilution, holding only 30% of the voting power and economic interest in the combined entity (Newco).
• Hulu (and ultimately Disney) will gain controlling interest (70% voting power) in Fubo, potentially leading to differing interests from other Fubo shareholders.
• Fubo will become a 'controlled company' under NYSE rules, exempting it from certain corporate governance requirements, which may reduce protections for minority shareholders.
• Fubo's principal asset post-transaction will be its interest in Newco, making it dependent on Newco's distributions to pay taxes and expenses, including substantial payments under the Tax Receivables Agreement.
• The Tax Receivables Agreement requires Fubo to make substantial cash payments to Hulu for certain tax benefits, which will reduce cash available for reinvestment or dividends.
• Fubo will not be reimbursed for payments made under the Tax Receivables Agreement if tax benefits are later disallowed.
• The integration of Fubo and the Hulu Live Business presents challenges and may not yield anticipated benefits or synergies.
• The market price of Class A Common Stock may be affected by factors different from historical Fubo Common Stock performance, and the 24-month lock-up expiration for Hulu's shares could negatively impact Fubo's stock price.

Risks

• The Transactions may not be completed on the terms or timeline currently contemplated, or at all, leading to material adverse consequences for Fubo.
• Fubo and Hulu will be subject to business uncertainties and contractual restrictions while the Transactions are pending, potentially affecting employee retention, business relationships, and operational momentum.
• The Business Combination Agreement contains provisions that may discourage other companies from trying to acquire Fubo, including a $50 million termination fee payable by Fubo in certain circumstances.
• Litigation challenging the Business Combination Agreement and the Transactions may prevent consummation or delay it.
• The Business Combination Agreement does not provide for adjustments to the ownership percentage of Newco or the number of Class A Common Stock shares based on Fubo's stock price fluctuations, creating uncertainty for shareholders.
• The long-term nature of certain Hulu Live Business content commitments may limit operating flexibility and adversely affect investment in new opportunities.
• Hulu Live Business results may be adversely affected if long-term content contracts are not renewed on sufficiently favorable terms or if popular content is not maintained.
• Inability to generate sufficient advertising revenue could adversely affect the Hulu Live Business.
• Hulu Live Business is subject to complex content provider agreements with various rights restrictions and onerous compliance obligations.
• Hulu Live Business faces risks of unforeseen costs and potential liability in connection with acquired or licensed content.
• Hulu Live Business is subject to numerous legal requirements regarding privacy, security, consumer protection, and data protection, with non-compliance potentially harming reputation and financial results.
• The financial assumptions, estimates, projections, and synergies prepared by management may not be realized, adversely affecting Class A Common Stock price.
• The unaudited pro forma financial information is for informational purposes only and may not indicate future financial condition or results.
• Hulu Live Business has no history of operating as a standalone company, and its historical financial information may not reflect future performance as part of Newco.
• Commercial arrangements with Hulu post-closing may be more or less favorable than those obtainable from unaffiliated third parties.
• If Newco ceases to be a Hulu subsidiary, it may be unable to replace services provided by Hulu in a timely manner or on comparable terms.
• Fubo will be exempt from certain NYSE corporate governance requirements as a controlled company, reducing protections for Fubo shareholders.
• Fubo's ability to pay taxes, expenses, and dividends depends on distributions from Newco, which may be subject to limitations and restrictions.
• Fubo will not be reimbursed for payments made to Hulu under the Tax Receivables Agreement if tax benefits are disallowed.
• Hulu's ability to transfer Class B Common Stock (or exchanged Class A Common Stock) after a 24-month lock-up could negatively impact Fubo's stock price.
• Fubo cannot predict the impact of its capital structure and concentrated control by Hulu on its stock price or business.
• Delaware Certificate of Incorporation's exclusive forum provisions could increase costs or limit shareholders' ability to bring claims.

Future Outlook

The combined company, Newco, is expected to realize meaningful annual cost and revenue synergies through content cost savings, advertising optimization, sales and marketing opportunities, and other operational efficiencies. Fubo's management projects Newco's total revenue to grow from $6,189 million in 2024E to $8,242 million in 2029E, with Adjusted EBITDA improving from a projected loss of $50 million in 2024E to a gain of $633 million in 2029E. The Up-C structure is intended to allow Hulu to maintain its economic ownership in pass-through form for tax purposes and potentially provide Fubo with tax basis increases upon redemption of Newco Units. The company anticipates continued growth in its sports-first Pay TV replacement product, enhanced by the integration of Hulu Live's content and subscriber base.

Management Comments

• The Fubo Board unanimously determined that entering into the Business Combination Agreement was in the best interests of Fubo and its shareholders.
• The Fubo Board unanimously resolved to recommend approval of the Business Combination Agreement, the Fubo Contribution, the Share Issuance, and the Fubo Conversion by Fubo Shareholders.
• David Gandler, CEO, and Edgar Bronfman Jr., Executive Chairman, expressed their support for the transaction, with Mr. Gandler confirming management's recommendation to approve the Potential Transaction.

Industry Context

The TV streaming industry is highly competitive, with numerous large technology and entertainment companies actively focusing on this sector. This environment makes it increasingly challenging for individual companies like Fubo to compete and grow as standalone entities. The merger with Hulu Live, a significant player in live TV content acquisition, positions the combined entity to potentially achieve greater scale, content diversity, and operational efficiencies in a consolidating market for content distribution.

Comparison to Industry Standards

• Fubo's trading price declined by 86.0% from its October 2020 IPO to January 3, 2025, while the S&P 500 increased by 83.6% in the same period, indicating underperformance relative to the broader market.
• Fubo was trading at a 0.4x multiple of consensus 2025 estimated revenue prior to the announcement, which is at the lower end compared to selected publicly traded subscription and advertising-based content & services companies (e.g., Netflix, Sirius XM, Spotify, Meta Platforms, Roku, Snap Inc.) which have a mean 2025E Revenue multiple of 2.5x and a median of 2.1x for advertising-based content & services, and higher for subscription-based content/services.
• The implied equity value per share for Fubo Common Stock on a standalone basis was estimated between $2.15 to $2.65, whereas the implied equity value per share for Newco (post-transaction) was estimated between $2.65 to $4.30, suggesting a potential value uplift from the combination.

Management Changes

Corporate Governance

Legal Proceedings

• Fubo's antitrust lawsuit (2024 Litigation) against Disney, ESPN, Hulu, Fox Corporation, and Warner Bros. Discovery, Inc. was permanently settled with prejudice concurrently with the Business Combination Agreement.
• The settlement of the 2024 Litigation is not contingent upon the Closing of the Transactions.
• Private antitrust putative class action lawsuits (Biddle Action, Fendelander Action, Unger Action) were filed against TWDC/Disney, alleging anti-competitive practices related to vMVPDs.
• The Unger Action, which includes Fubo subscribers, was consolidated with the Biddle/Fendelander Action.
• A settlement in principle was reached on June 5, 2025, for the Biddle/Fendelander Action, but issues regarding interim class counsel appointment arose on July 21, 2025, affecting the authority to settle for all classes.

Related Party Transactions

• Hulu will contribute the Hulu Live Business and its assets to Newco, receiving a 70% economic and voting interest in the combined entity.
• Fubo will receive a $220 million cash payment from Disney upon signing the Business Combination Agreement and Settlement Agreement.
• A Disney affiliate committed to provide Fubo with a $145 million senior unsecured term facility, available January 5, 2026.
• Commercial agreements will be entered into at Closing, including the HL Transition Services Agreement, HL Commercial Services Agreement, and Hulu Brand License Agreement.
• Under the HL Commercial Services Agreement, HL will grant Hulu the right to distribute the HL DMVPD Service via the Hulu platform in exchange for a wholesale fee (initially 95% of carriage fee expenses).
• Disney affiliates will exclusively sell ads on behalf of HL and Fubo, receiving a 15% ad agency fee.
• Hulu will license HL DMVPD-specific brands to HL for use in the Hulu Live Business.
• A Tax Receivables Agreement will be established, requiring Fubo to pay Hulu a percentage (up to 70%) of certain tax benefits realized by Fubo.
• Fubo entered into a carriage agreement with Disney affiliates for a new Sports & Broadcast service featuring Disney's sports and broadcast networks, effective regardless of the Transactions' consummation.

Stakeholder Impact

• **Shareholders (Fubo):** Will experience significant dilution, holding 30% of the voting power and economic interest in the combined entity. Their rights will be governed by Delaware law and new corporate documents, and Fubo's 'controlled company' status may reduce their influence. However, they may benefit from increased liquidity, litigation settlement, and potential synergies.
• **Employees (Fubo):** Fubo's existing management team will continue. Retention bonus programs totaling $20.5 million are in place for executive officers and key employees. Fubo Ad Sales Employees may receive offers from Hulu or a Disney affiliate, with severance protections if not employed by Hulu/affiliate.
• **Customers (Fubo & Hulu Live):** The combined entity aims to enhance consumer choice by making a broader set of programming offerings available. The Sports & Broadcast service will offer new content.
• **Creditors (Fubo):** The $145 million term facility from a Disney affiliate provides a clear path to refinance Fubo's 2026 Convertible Notes, potentially improving Fubo's financial stability.
• **Hulu (Disney):** Gains controlling interest in a larger, publicly traded streaming entity, expanding its market presence and leveraging its content and advertising infrastructure.

Next Steps

• Fubo shareholders will vote on the Business Combination Agreement and related proposals at a Special Meeting on September 30, 2025.
• Fubo and Disney are working to certify substantial compliance with the DOJ's Second Request to resume the HSR waiting period.
• The Closing of the Transactions is currently expected in the fourth quarter of calendar year 2025 or the first quarter of calendar year 2026, assuming timely satisfaction or waiver of closing conditions.
• Fubo, Disney, and Hulu will finalize and enter into several ancillary commercial agreements effective at Closing, including a Tax Receivables Agreement, Registration Rights Agreement, and various commercial services agreements.

Key Dates

Recommendation

The proposed business combination with Hulu Live, backed by Disney, offers Fubo significant strategic advantages, including a substantial cash infusion, debt refinancing, and the resolution of a major antitrust lawsuit. The potential for synergies in content costs, advertising, and marketing is considerable. However, existing Fubo shareholders face significant dilution, with Disney-controlled Hulu gaining 70% voting power, effectively making Fubo a 'controlled company.' This shift in control, along with the substantial payments under the Tax Receivables Agreement to Hulu, introduces new risks and limits the upside for minority shareholders. While the settlement of litigation and access to capital are positive, the long-term value creation for current Fubo shareholders is uncertain given the loss of control and the complexities of integration. Therefore, a 'hold' recommendation is appropriate, advising investors to monitor the integration process, synergy realization, and the impact of the new governance structure before making further investment decisions.

Keywords

FuboTV, Hulu Live, Disney, Business Combination, Merger, SEC Filing, DEFM14A, Streaming, Live TV, Antitrust Settlement, Corporate Governance, Shareholder Vote, Up-C Reorganization, Class A Common Stock, Class B Common Stock, Dilution, Capital Raise, Risk Factors, Financial Projections