LONDON/PARIS: Walt Disney Co has come to the rescue of its loss-making subsidiary Euro Disney with a €1bn ($1.3bn) funding deal announced yesterday, which could give the US group total control over Europe’s biggest tourist attraction.
The deal includes a rights issue and debt restructuring which will inject €420m in cash into the Euro Disney group and eliminate €600m of its debt owed to Walt Disney via an equity swap.
Euro Disney is currently 40 percent owned by Walt Disney and 10 percent by the Saudi prince AlWaleed bin Talal with the rights issue to raise €351m open to all shareholders but backed by Walt Disney, which will be required to make a tender offer for the whole company.
Twenty miles east of Paris, the resort has struggled amid the economic downturn in Europe, with attendances down by 700,000 to 800,000 visitors at just over 14 million visitors in the last year. At the same time its total debt of €1.75bn which is owed to Walt Disney has hampered its ability to invest in upgrades to the park.
The company said it estimates that revenue for the year just ended on September 30 fell by up to 3 percent to €1.27bn while earnings before interest, tax, depreciation and amortisation (EBITDA) dipped to €110m-€120m from €144m and net losses rose to between €110m-€120m from €78m.
“This proposal to recapitalise the Euro Disney Group is essential to improve our financial health and enable us to continue making investments in the resort that enhance the guest experience,” company president Tom Wolber said in a statement.
Under the plan, shareholders are to be offered nine new shares for every one held for €1 a share, raising €351m. The company said the rights offer price represented a 20 percent discount to Friday’s closing price, adjusted for the issuance of the new shares.
In addition, shareholders will have the option to buy some of the shares issued in the debt conversion at €1.25 a share to avoid diluting their stakes. The company’s debt will fall to €998m, taking the company’s balance sheet from a negative equity position of around €200m at the end of September to positive equity of €800m. Depending on shareholder uptake of the rights issue and debt swap, the company said there was a small chance that the listed entity could be removed from the stock market.
Shares in Euro Disney were down 13.6 percent at €2.99 by 1045 GMT as investors digested the mooted changes. “The objective of this operation is to strengthen Euro Disney, not to de-list it from the stock market,” Finance Director Mark Stead told Reuters. “Everything has been done to help convince shareholders to support the operation and subscribe to the capital increase so as to accompany Walt Disney in developing the company.”
Stead said that the level of Walt Disney’s holding in Euro Disney after the capital increase and debt restructuring will be determined by how many other shareholders take up the share offers.
AlWaleed bin Talal has not yet decided whether to subscribe to the share capital increase. “I spoke to the Prince this morning, he welcomed the transaction but he hasn’t yet taken a stand on which way he wants to go, he’ll be coming back to us in about a week’s time,” said Stead. Reuters
