Walt Disney rescues Euro Disney with $1.3 billion funding deal
By Kate Holton and Leila Abboud
LONDON/PARIS (Reuters) - Walt Disney Co (DIS.N: Quote) has come to the rescue of its loss-making subsidiary Euro Disney (EDLP.PA: Quote) with a 1 billion-euro ($1.3 billion) funding deal announced on Monday, which could give the U.S. group total control over Europe's biggest tourist attraction.
The deal includes a rights issue and debt restructuring which will inject 420 million euro in cash into the Euro Disney group and eliminate 600 million euros 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 351 million euros 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 1.75 billion euros 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 Sept. 30 fell by up to 3 percent to 1.27 billion euros while earnings before interest, tax, depreciation and amortization (EBITDA) dipped to 110-120 million euros from 144 million and net losses rose to between 110-120 million euros from 78 million.
"This proposal to recapitalize 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 euro a share, raising 351 million euros. 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 euros a share to avoid diluting their stakes. The company's debt will fall to 998 million euros, taking the company's balance sheet from a negative equity position of around 200 million euros at the end of September to positive equity of 800 million. Continued...