July 6 (Bloomberg) -- Chernin Group and AT&T Inc. submitted a joint bid for Hulu LLC, the video-streaming service, meeting the deadline for binding offers, according to a person with knowledge of the situation.
Bids for Los Angeles-based Hulu, owned by Walt Disney Co., 21st Century Fox Inc. and Comcast Corp., were due yesterday, said two people, who sought anonymity because the sale process is private. The value of the offer wasn’t immediately known.
Three suitors, including DirecTV, previously had offered at least $1 billion, people familiar with the matter said in May. Hulu would give Chernin Group an online outlet for programming. Led by former News Corp. President and Chief Operating Officer Peter Chernin, the company produced the “Rise of the Planet of the Apes” film and TV’s “New Girl.” It also backed startups such as Tumblr Inc. and Flipboard Inc.
Charles Sipkins, a Chernin spokesman, declined to comment, as did Brad Burns, a spokesman for Dallas-based AT&T. Meredith Kendall, a spokeswoman for Hulu, also declined to comment. The auction is being run by Guggenheim Partners LLC.
Chernin, 62, was a founder of Hulu while at News Corp. and served on the Internet company’s board. In April, his Santa Monica, California-based firm offered at least $830 million for the website, including the assumption of $330 million in debt, people with knowledge of the matter said at the time.
Last month, Chernin Group joined with AT&T, which operates the pay-TV service U-verse, to work on a bid, the two people said.
Hulu’s board also previously received non-binding bids from Guggenheim Digital LLC, owner of the Hollywood Reporter; Yahoo! Inc., the largest U.S. Web portal; Time Warner Cable Inc., the second-biggest U.S. cable system; and private-equity firm KKR & Co. Silver Lake Partners and talent agency William Morris Endeavor Entertainment LLC made a joint proposal. It’s unclear if any of those companies submitted a final offer.
After Hulu’s board selects a buyer, the winning bidder will need to negotiate content licensing with Disney and Fox, the people said. The media companies are offering an extension at current rates for two years for the Hulu Plus service and five years for the free model, the people said.
Hulu allows people to watch network-TV shows and other programs over the Internet -- a popular option among people who have dropped their cable or satellite subscriptions, or so-called cord cutters. The site offers a free version of the service and a $7.99-a-month service with greater access to shows. Hulu said the number of paying subscribers exceeded 4 million in the first quarter.
Hulu’s free, ad-supported business is profitable, a person familiar with the matter said in June. Hulu Plus, the paid service, loses money, the person said. Though it generates monthly subscriber fees, Hulu Plus also has higher licensing costs for the more extensive programming. Hulu Plus could be profitable in 18 months, the person said.
Two of the three owners, Disney and Fox, have clashed over Hulu’s future, leading to the current auction. Comcast, the third owner, is barred from an operational or board role under an agreement with regulators related to its NBC Universal acquisition in January 2011.
Disney, based in Burbank, California, gained 0.3 percent to $63.82 yesterday in New York. The stock has risen 28 percent this year. New York-based 21st Century Fox, recently split from News Corp., gained 2.5 percent to $30.39, while Comcast, based in Philadelphia, added 1.3 percent to $41.70.
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