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Buyout is a Strong Possibilty for Struggling Disneyland Paris

8/28/2012 10:14:33 AM EST
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Since 1992, Disneyland Paris has been Europe’s number one tourist destination with an estimated 10 million guests or more going through its two theme park gates every year. One would think that after being open for 30 years that everything is operating smoothly and the resort, located about 20 miles east of central Paris, would be showing a healthy profit. Unfortunately, this is not the case. Rumors are swirling around that The Walt Disney Company is considering buying out other shareholders and placing the Paris park under it theme park wing. According to TIME, serious discussions have been taking place internally about buying out the stock.

For the uninitiated, the Paris resort is managed by a publicly traded French company, Euro Disney SCA, of which Disney has a forty percent stake. Saudi businessman Al Waleed Bin Talal owns an estimated ten percent, while the other fifty percent is held by individual and institutional shareholders. For Disney to buy out the remaining stock it is thought it would cost an estimated $120 million. Disney’s reasons for this aren’t clear, although after 30 years they may want some return. By now, they should have been getting both royalties payments and management fees from the resort, but due to the poor financial performance, these fees have been hardly, if ever, paid and when there has been money to pay them WDC has deferred. Sadly, since the first guest walked through the gate thirty years ago, DLP has been plagued by financial trouble; twice having to restructure its debts and  making net losses.

Although trading for this year will certainly make the accountants a bit happier, it needs to continue to have any chance for the debts to be repaid. Once the 30th Anniversary celebrations are over, there are no guarantees, especially with so much financial uncertainty in Europe. Although, if they do, twenty five percent of the debt could be paid off within the next six years. Whether that would be enough to halt a potential buyout, no one knows. If a buyout did go ahead, however, the potential for Paris is huge. It’s thought that Disney would invest heavily in an attempt to boost visitor number significantly, also add to that an option for a third gate by 2030, and a buyout now may be a shrewd move by the mouse.

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