Disney said to be considering buyout of EuroDisney, taking control of Disneyland Paris Resort
Written by Robert NilesTime 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.
Published: August 24, 2012 at 11:17 AM
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.
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