Mickey's money pit: Disney bails out Euro Disney again with $2 billion cash injection and increases its own stakes before an imminent financial collapse

This is the bottomless money pit known as Disneyland Paris
Disney has once again, for at least the fourth time in its very short history, been forced to come to the rescue of the flailing Disneyland Paris Resort in Marne-la-Vallée, France, to bail it out before an imminent financial collapse.

Even Donald can't stand to look
The company announced today that it would pump more than €1.5 billion ($1.6 billion) into the embattled European theme park resort to "address its financial needs," which presumably will primarily address problems with massive debt restructuring and make some badly needed improvements to the infrastructure at the resort.

The latest rescue follows a €1 billion ($1.06 billion) bailout in 2014 after massive losses from falling attendance numbers and decreased spending by park visitors.

In the past, Disney has had to bailout Euro Disney on at least three other separate occasions over its brief 26-year history, restructuring its debt on a number of occasions and increasing its ownership stake each time in the process.

Euro Disney has recorded massive losses in its operations during 18 of its last 25 fiscal years.


In the latest bailout bid, Disney increased its ownership stake in Euro Disney S.C.A. from 76.7% to 85.7% and made a cash offering to buy out the rest of Euro Disney's outstanding shares for €2 per share—a 67% premium to Euro Disney's closing share price on February 9—the cost of which is nearly €356 million ($379 million.)

Disneyland Paris was originally known as Euro Disney
All told when the dust has finally settled, Disney will have sunk well over $2 billion into the bottomless money pit, known as Euro Disney, in their latest move to save it from imminent financial collapse.

In the 1989, the Walt Disney Company set up the publicly traded holding company, Euro Disney S.C.A., to run the Disneyland Paris Resort (formerly known as Euro Disney Resort) and to attract private investors to help pay for the massive start-up and construction costs of the resort, which formally opened on April 12, 1992.

Euro Disney was partly-owned by Disney as a joint-venture; however, it nonetheless still kicked back royalties and licensing fees to Disney.

In recent years, many activist Euro Disney shareholders have sued Disney in French courts, alleging the House of Mouse had been siphoning off excessive royalties while Euro Disney's assets had been undervalued, all in an attempt to drive out other shareholders; however, now it seems Disney's clandestine business strategy to achieve those goals has come to full fruition.

In the latest bailout, Disney, who is the majority stakeholder in Euro Disney, raised its ownership stakes in Euro Disney from 76.7% to 85.7% by buying out 90% of Kingdom Holding Company's (owned by Saudi Prince Alwaleed Bin Talal) stake in Euro Disney.


Disney, through its subsidiary EDL Holding Company, is increasing its stake by 9 percent for €2 ($2.13) a share, in exchange for Disney common stock, the company said in a press release.


Prince Alwaleed Bin Talal will still retain a nominal 1% stake in Euro Disney after the deal; however, Disney also announced it intends to buy out all the remaining outstanding shares of Euro Disney for the same €2 in cash per share.

The increasing threat of a terrorist attack inside France has been the biggest
reason for plummeting attendance numbers inside Disneyland Paris
If Disney owns at least 95% of Euro Disney's shares, it could promptly force a buyout of any outstanding shares from any other shareholders under French stock exchange rules and delist Euro Disney shares from the Euronext Paris stock exchange.

If successful, the move could see an end to private investing in the failed Euro Disney joint venture, leaving Disney as the sole owner of the flailing theme park and resort.

Disneyland Paris has struggled to stay afloat ever since its disastrous opening back in 1992, when it was then known as Euro Disney.

Many guests and employees, alike, in France have clashed with Disney over cultural issues imposed within the theme park, which some critics called a "cultural Chernobyl."

The theme park has since struggled with huge debt and weak attendance numbers for decades from many different issues—other than cultural ones—ranging Europe's debt crisis, poor exchange rates with countries outside of the E.U., and recently with the growing threat of terrorism inside France and the larger E.U.


As recently as last November, French authorities uncovered an ISIS sleeper cell that intended on attacking the Disneyland Paris Resort as a target, reminiscent of the deadly November 2015 ISIS terrorist attacks in Paris on "Friday the 13th."


France has remained in a state of emergency ever since the deadly November 13, 2015 attacks in Paris, which killed 130 people and seriously injured another 368.

There have been several near-miss acts of terrorism at several of the Disney
theme parks worldwide, including at Walt Disney World, Disneyland
Anaheim, and, of course, Disneyland Paris
Disney has acknowledged that Disneyland Paris' operations has been "significantly and negatively impacted" by the ongoing terror attacks from ISIS and lone wolf terrorists who pledge their allegiance to ISIS inside of France.

Disney has also acknowledged that there are other "challenging business conditions" that they must deal with inside of Europe, which they did not elaborate on.

The number of visitors to the theme park dropped from 14.8 million in 2015 to 13.4 million in 2016, with hotel occupancy rates and average spending per rooms also plummeting over the past year.

In that same period of time, international tourism numbers to France have fallen by 5% over the first nine months of 2016, while tourism spending also dropped by 6.6%.


This news comes at a very difficult time for Disney's theme parks and resorts operations worldwide. Disney is also currently bailing out its faltering Disneyland Hong Kong Resort with a $1.4 billion infusion of cash to significantly expand its entertainment and dining offerings inside the park, after that resort, again, began to financially falter these past two years, well ahead of the expected grand opening of Disney's $5.5 billion Disneyland Shanghai Resort in June of 2016.

Disney bought out 90% of Saudi Prince Alwaleed Bin Talal's shares in Euro Disney
In addition, attendance numbers at Disneyland Shanghai have all but dried up in recent months, due to poor word of mouth from visitors over social media inside mainland China.

Disney has responded to the sudden decline in visitor numbers in Shanghai by announcing plans to add a kid's oriented Toy Story Land to the new $5.5 billion theme park—a move similar to the move the company made in 2002 in adding A Bug's Land to the then struggling Disney California Adventure in Anaheim. Disney, however, would not disclose how much the expansion project would cost.

While at home, Disney has seen visitor numbers to its domestic theme parks dramatically plummet this past year, seeing a 10% and 5% decline in attendance, respectively, in each of the last two fiscal quarters.


Needless to say, Disney's theme parks and resorts segment, in general, has been a disaster this past year. Disney hopes to complete the buyout and have the embarrassing Euro Disney venture quietly delisted from the Euronext Paris stock exchange by next June, if not sooner.


Sources:

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