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Disney said to be considering buyout of EuroDisney, taking control of Disneyland Paris Resort

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Published: August 24, 2012 at 11:17 AM

Time magazine reported this morning that Disney is considering buying out its financial partners in EuroDisney SCA, the holding company that owns the Disneyland Paris Resort.

Disneyland Paris

Disney now owns about 40 percent of EuroDisney, but according to Time's math, the remaining 60 percent of the EuroDisney shares cost only about US$120 million. That would put the entire market value of the Disneyland Paris Resort at around $200 million. That's just one-fifth of what Disney spent upgrading California Adventure.

The Disneyland Paris has been a financial mess ever since it opened as the one-park EuroDisneyland in 1992. Too-optimistic assumptions about real estate development on the property led the company to borrow a ton of money it couldn't easily repay with just park revenues when the real estate deals didn't work out.

And once something's in heavy debt, the interest payments become a bigger and bigger expense, robbing the company of opportunities to spend its money in other ways - such as improving the underdeveloped Walt Disney Studios Park, or bringing the woeful Disney Village up to Disney's design and customer experience standards.

Disneyland Paris needs an infusion of cash to pay down its remaining debt and to build new attractions. But it's a much smarter business deal for Disney to make that investment if it gets 100% of the return back, instead of just 40%, as it would now with its current ownership stake. And heaven knows EuroDisney's other stockholders aren't going to want to throw more money into the company, after so many of them have taken a loss by buying into EuroDisney at a higher stock price than it's now worth.

So Disney's got two options: Let Disneyland Paris linger, making what the late Steve Jobs called a "brand withdrawal" on the Disney name as its facilities decline, or jump in and buy out the company.

At $120 million, that second option isn't just the right one - it's a relative bargain, too. Here's hoping that we'll soon be seeing some great improvements at the Disneyland Paris Resort.

Readers' Opinions

From Sean Huckel on August 24, 2012 at 11:20 AM
Huge, and terrific, news if true. DLP is a beautiful and amazing theme park that deserves so much better than the crap that's been placed around it. Disney could come in and clean up the entire resort and bring it to their standards.

Really hoping this comes true.

From Eric Malone on August 24, 2012 at 12:19 PM
I'd be genuinely surprised if they didn't do the buyout.
From Rob Pastor on August 24, 2012 at 1:15 PM
The buyout would probably be more than $120 million, depending on the price of the offering, so it probably would be in the $150 million dollar range. Debt looks to be around $2 billion, but Disney is now responsible for about 40% of that anyway. The resort has cleaned up it's balance sheet in the past few years. The cost to build the resort in today's dollars (or Euros) would be way above the present debt. Disney could, with a significant financial outlay, improve the Studios Park easily, and also improve the main park, hotels, and run it the right (Disney) way. {Just don't let the French on the management team. Too bad they couldn't just pick up the whole resort and deposit in Spain or Italy where the people and weather are significantly better.} It sure looks like it could be a winner for Disney in the long run. Just hope a significant investment here wouldn't take away from major improvements to the heretofore neglected Disney World Resort.
From Chad H on August 24, 2012 at 3:36 PM
I think Disney's big problem at the moment is there are too many MK parks. With Shanghai included there's now 6 - 3 in Asia, 2 in the Americas, and 1 in Europe. Rather than being a "World" grade tourist puller, they're now regional pullers - Families in Asia and Australia are going to have a hard time deciding WDW over Shangahi, Tokyo and HongKong given the closeness of these other options. A European family will have the same issue with Paris at the moment - even though most of those who make the Flordia trek (that I've talked to) acknowledge its superiority.

Basically Disney's problem is that Disney's biggest competition is Disney.

A trip to Flordia is a a just as a viable destination for a Brit at least (we even get advertisements for Busch Gardens and UOA) as DP, I can't speak for the rest of the continent.

"losing" Disneyland Paris would be a huge prestige blow. I think the solution is a complete rethink. Tokyo has Disneysea that makes it different, maybe the solution make a big change to DP to make it unlike the other MK parks - maybe even abandon the MK concept as we know it... Make it a park that Americans (and even Europeans) cannot visit anywhere else.

Not unlike a certain park in Anahiem used to be once.

From Flavio de Souza on August 24, 2012 at 6:19 PM
That is terrific news!!!! Since euro Disney cannot hold more debt, it was impossible to do the upgrade the resort, specially the Studios, needed.

But get rid of all french managers as Rob suggested would be a huge mistake. No one can manage a company in a foreign country without local people.

The 5 Disneylands are regional parks, but WDW is a world destination.

From 84.56.84.214 on August 25, 2012 at 7:39 AM
Disney always had and always will have full managment control either way. Considering how much the park is worth:
Just market cap is not the right way to look at, better: Market cap + debt explicit and implicit through franchise and managment fees. That would be how much the resort is considered to be worth by the market idependet of who gets the money.


Btw, Disney alread owns 60% since Euro Disney SCA only owns 80% of the park, while the other 20% are directly held by Disney ( its even more complicated strictly legal speaking, with the park property technically owned by creditors for tax reasons or sth like that ).

So (~1900(debt)+164/0,8) + estimate for cash value of franchise and managment fees, currently arround 62 million a year. Make that at least 62*15 ~ 3500€ valuation for the resort.


From Michelle Pilling on August 25, 2012 at 1:44 PM
Hello,
I love DLPR, but its needs a overall, staff, resort hotels the theme parks.Last time we visited it was dirty, shabby and staff were rude. It needs a injection of special deals and offer for everyone, not just the FRENCH Citizans. It is twice as expensive for the British to have breaks there. It cheaper to go to WDW or DCR than Paris. I welcome a new mangerment team for future tourism, visiting DLPR. love Michelle x
From 78.111.197.161 on August 26, 2012 at 12:20 AM
DLP is an amusing park and sits close behind hong kong as the best magic kingdom style park (for theming and feel). I also found it meticulously clean

As mentioned the big problem is the people.

It always feels overcrowded, a large number of the guests are pushy and rude, and the staff are on the most part absolutely useless.

There are major issues with the way things are organised.extra magic hours with the majority of the major rides not open, all but 1 of the quick serves being closed on a very busy day signs outside mot of the restaurants saying we're closed but try this other place (only for that place to be closed as well and really unhelpful staff who aren't able to answer simple questions.

From Anon Mouse on August 26, 2012 at 10:10 AM
It would make sense to buy the place out before Disney were to invest a Billion dollars into it. Of course, they have to assume the massive debt, but I'm sure Disney will make the money back. I don't think the current Euro shareholders will make it easy. The shares will bump up in price after Wall Streets gets wind of this.
From Ted Heumann on August 27, 2012 at 10:50 AM
Are there foreign ownership restrictions? Is that why Disney didn't own 100% to begin with?
Would it make more sense to wait until the Euro drops further against the dollar?
Otherwise, this is a GREAT idea.

P.S. I've seen the ownership and control flowchart for EuroDisney SCA and it gave me a SERIOUS headache, it was THAT complicated.

From 86.139.118.222 on August 28, 2012 at 3:58 PM
I've just returned from DLP and must say it really needs some Disney magic. The DL park there is very beautiful but a few things ruined it for me. For example, there were a lot of people smoking which at times you could not escape from, especially if they were lighting up next to you in a line for an attraction. Also, some of the cast members really need a lesson on customer service. The WDS park is just a mess. I think it would have been more honest to call it a 'land' rather than a park as it is so small. Saying that, the resort has a lot of potential but needs direction and some investment in the right areas.

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