Oct 6, 2014 9:25 AM
Euro Disney shares dive as it needs bailout
The Associated Press
PARIS (AP) In Europe, even Mickey Mouse is getting a bailout.
The Disney resort on the outskirts of Paris is getting a financial lifeline from owner The Walt Disney Company to handle rising debt and a decline in visitors at a time of economic uncertainty in Europe.
The 1 billion-euro ($1.3 billion) lifeline will see the park's California masters take control of Euro Disney, which runs Disneyland Paris and Walt Disney Studios Park. Until now, the U.S. company owned only 40 percent of the theme park operator, alongside Saudi prince Al-Waleed Bin Talal and a host of small European investors who originally paid 11 euros a share for their piece of the Disney dream.
The shares have traded under five euros for most of the last year, and Monday's announcement sent them lower still. By midday in Paris, the stock had plunged 7.2 percent at 3.20 euros.
The fiasco reflects not just a chronically disappointing performance by the company, but also the weak economic environment in Europe over the past six years, which has seen families across the region cut down on spending.
Just over half of Euro Disney's guests are French. The British, Spanish, Dutch and Belgians make up a combined one third, according to 2013 figures. Overall, the park welcomed 14.9 million visitors last year, but this year Euro Disney forecasts that to drop to between 14.1 and 14.2 million.
The European venture has never lived up to its founders' original attendance goals, which saw the park attracting up to 16 million annual visitors by 2004. In 22 years of operation, attendance has grown barely 28 percent.
By contrast, other international Disney parks, in Tokyo and Hong Kong, seem to be doing fine. The Japanese outpost, which licenses the Disney theme and isn't owned by Disney, says it's been the most profitable Disney resort since opening in 1983. Its Chinese property, Hong Kong Disneyland Resort, doubled its profit and saw revenue increase 15 percent.
Debt has strangled Mickey Mouse's Paris park from the beginning, and Monday's reckoning is only the latest in a series of park bailouts and financial restructurings that have marked its history.
"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 CEO Tom Wolber said.
Euro Disney forecast a one to three percent drop in revenue this year compared to last, and said it could lose up to 120 million euros in the period, compared with a 78 million loss last year. The company has over 1.7 billion in debt, owed to the Walt Disney Company.