If all goes according to plan, in June 2017, Disney(DIS) will take full ownership of Euro Disney(EUDSF) and finally end the embarrassing cycle of public bailouts and recriminations from minority investors. As recently as 2015, Disney owned just 40% of Euro Disney. A bailout that year increased its stake to 77% and led to an outcry from investors who claim that Disney has deliberately sandbagged the company in order to take full control more cheaply. These investors refused a 2015 tender for their shares at €1.25.
Now, blaming the Paris terror attacks for decreased attendance, Europe’s most-visited tourist attraction once again needs a bailout, and, once again, Disney is offering to buy the rest of the company and bail it out. This morning, Disney announced it would be purchasing a 9% stake in Euro Disney from Kingdom Holdings for €2.00 per share in Disney stock. This is a 67% premium to yesterday’s close, and will bring Disney’s stake to 85.7% when the sale is completed on February 15. From April 21 until May 19, Disney will conduct a tender offer of €2.00 per share in cash for all shares it does not own. If as a result of the tender offer, Disney owns 95% or more of Euro Disney, it will follow up with a mandatory tender and a delisting. Disney will also support a €1.5 billion recapitalization that will hopefully finally give Euro Disney the breathing room to succeed.
If Disney is successful in completing this transaction, it will be the first non-US Disney theme park fully owned by Disney. What lessons has Disney learned in France that have caused it do things differently in Shanghai and Hong Kong? Euro Disney’s struggles aside, this consolidation of ownership will ultimately benefit Disney, and Disney’s ability to improve the park will be much less restricted.
Disclosure: The author holds a position in Disney