Disney Backs $1.25 Billion Euro Disney Funding Deal

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It says it has "continued confidence in Disneyland Paris, which remains the number one tourist destination in Europe" despite recent challenges

Euro Disney, the operator of Disneyland Paris, on Monday announced plans for a $1.25 billion funding deal backed by the Walt Disney Co., its largest shareholder with a 40 percent stake. The deal is designed to strengthen the theme park arm's financial position amid declining visitors and rising debt.

"With this effort, we are demonstrating The Walt Disney Company's continued confidence in Disneyland Paris, which remains the number one tourist destination in Europe," Disney said. Euro Disney has faced challenges amid a weak economy in recent years. The resort has attracted more than 275 million visitors since it opened in 1992.

After the first three quarters of 2014, Euro Disney estimated attendance for the full fiscal year ended September dropped to 14.1 million-14.2 million from 14.9 million  in the previous year.

Read more Shanghai Disney Imports Euro Leader From Paris

It wasn't immediately clear if Saudi prince Alwaleed bin Talal, who owns a 10 percent stake in Euro Disney, and other shareholders would also participate in the recapitalization.

In 2012, Disney had already loaned Euro Disney $1.7 billion. Some analysts have in the past suggested that Disney could eventually take the company private. Euro Disney said Disney's stake after the bailout would depend on how many shareholders participate. If none participate, Disney could end up with full control of the firm, but it said that was not the goal and emphasized there was only a very small chance of that happening.

The financing deal includes plans for a share sale and a debt restructuring to put Euro Disney in a position to invest in its business.

The funding deal would improve the cash position of Euro Disney by pumping more than $500 million into the company. Plus, about $750 million of the firm's debt owed to Walt Disney would be converted into stock.

The Disney theme parks operations are overseen by Tom Staggs, one of the top contenders to one day succeed Disney CEO Robert Iger.

Euro Disney shares fell sharply in Monday trading. As of mid-day Paris time, the stock was down 18.5 percent.

Oct. 6, 2:05 a.m. Updated with stock reaction.

Email: Georg.Szalai@THR.com
Twitter: @georgszalai