Walt Disney Takes Another Costly Ride at French Theme Park
February 10 2017 - 7:30AM
Dow Jones News
By Nick Kostov
PARIS-- Walt Disney Co. on Friday tightened its grip on Euro
Disney SCA and said it would support a cash injection of up to
EUR1.5 billion ($1.6 billion) to fund improvements and reduce debt
at the struggling French theme park.
The U.S. company said that Kingdom Holding, the investment firm
owned by billionaire Prince al-Waleed bin Talal, had traded 90% of
its shares in Euro Disney into Walt Disney stock. Walt Disney said
it was buying the stake from Kingdom Holding at EUR2 a share,
increasing its shareholding in Euro Disney to 85.7% from 76.7%.
Walt Disney, the company behind the "Star Wars" and "Frozen"
franchises, said it then intends to make an offer for all remaining
Euro Disney shares at the same price, a 67% premium to Euro
Disney's closing share price on Feb. 9. If Disney secures at least
a 95% stake following the offer, it plans to delist the company
from Euronext Paris.
The pledge won't be the first time Walt Disney has plowed funds
into Euro Disney as it struggles to replicate the success of its
U.S. theme parks. It follows a 2014 rescue package when the resort
was promised EUR1 billion over 10 years to improve its attractions
and a financing plan to restructure debt at the French business two
years earlier.
Euro Disney raised money from outside shareholders when it went
public in 1989 and has remained a separate company from Walt
Disney, part-owned by and paying royalties to the U.S. firm. It
opened its doors in 1992 but quickly ran into trouble as
construction costs soared and operational blunders compounded the
debt burden.
Lampooned on cartoon series The Simpsons for a lack of visitors
and financial problems, Euro Disney has been a disaster for
shareholders. In a cluster of legal disputes playing out in French
courts in recent years, a group of activist shareholders alleged
that Walt Disney has siphoned off excessive royalties while Euro
Disney's assets have been undervalued, in an attempt to drive them
out. Euro Disney has said that the claims are baseless.
On Friday, Walt Disney pledged to support a recapitalization of
up to EUR1.5 billion for Euro Disney to enable it to "continue
implementation of improvements to Disneyland Paris, reduce debt and
increase liquidity." The theme park's recent earnings have been
pressured by a drop in visitors to Paris following the terror
attacks in Nov. 2015 and difficult economic conditions in
Europe.
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
February 10, 2017 07:15 ET (12:15 GMT)
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