Land and Dominance Dispute in Disney's 59 Years (Part Three) Bank of America Merrill Lynch and Morgan Stanley currently both recommend buying OLC stocks. The latter's Japanese analyst, Naoshi Nema, stated that the company has been very successful in reducing costs to cope with economic downturns.
The Reluctant French Joint Venture
Euro Disney S.C.A. (EDL.PA, hereafter referred to as "EDL") and The Walt Disney Company announced their fourth-quarter results on the same day, recording a net loss of 63 million euros in the 2009 fiscal year. Han Ting only achieved an EBITDA profit margin of 15.2%, even though it attracted a record-breaking 15.4 million visitors in the 2009 fiscal year.
This is the European version of Hong Kong Disneyland being overshadowed by Ocean Park Hong Kong—currently, EDL’s market capitalization is 201 million euros, less than half of its local competitor Compagnie des Alpes SA (CDA.PA), which stands at 445 million euros. However, EDL's issued share capital is more than twice that of the latter. French investment bank NATIXIS analyst Sarah Emsellem suggests that instead of investing in EDL, one should choose Compagnie des Alpes SA, which operates 17 ski resorts in the Alps region.
EDL has a long list of years with poor performance, even rewriting its equity structure as a result.
According to the original arrangement, Disney held 49% of the shares in EDL, while France provided cash grants and bandwidth for financing the construction—France's government initially wanted the project to be privately operated. However, EDL faced significant operational difficulties in 1994, forcing the French government to lead a syndicate of 60 banks to extend the debt repayment period and reduce interest rates. The syndicate also publicly offered 51% of the project's equity. Disney made concessions, selling 10% of its shares to Saudi Prince Al-Waleed bin Talal, who was known as the "Saudi Buffett" (Al-Waleed bin Talal had already acquired 14% of the shares from the secondary market, making him EDL's second-largest shareholder).
Nowadays, according to EDL's explanatory materials, The Walt Disney Company holds a controlling stake of 39.78%, Al-Waleed bin Talal owns 10%, and the remaining shares are publicly traded.
The French government's assistance left a deep mark: the chain of hotels is actually owned by a project company named “Phase 1 Financial Company,” which leases the park to the operator Euro Disney Associés S.C.A. (shortened as "EDA") for operation. EDL owns 82% of EDA, while The Walt Disney Company directly holds the remaining 18%. Phase 1 Financial Company's 83% equity is owned by major French banks, financial institutions, and companies. Similarly, the land for the retail complex project "Disney Village Paris" developed by EDL is held by a project company named "Phase 2 Financial Company," which rents the land to EDA.
The complex equity structure separates the ownership and operating rights of Euro Disney. However, The Walt Disney Company controls the operations of Phase 1 Financial Company and Phase 2 Financial Company through its subsidiaries and grand subsidiaries.
To this day, EDL and Hong Kong Disneyland, which also adopts a joint venture model, remain two major overseas investment projects consolidated into The Walt Disney Company's financial statements.