Kingdom Holding Participates in the Euro Disney recapitalization by injecting €49.2 Million.

Prince-Alwaleed-Grandchildren-at-Euro-Disney-Paris-Nov-2015

The Kingdom Holding Company confirmed today (18 November 2015) that they have fully participated in the Euro Disney S.C.A. Cash Tender Offer and Anti Dilution Mechanism as part of the  recapitalization rights issue.

The Saudi Arabian based Kingdom Holding Company chaired by HRH Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud  has injected an additional investment of €49.2 million by taking part in the  Euro Disney S.C.A. financial recapitalization plan  and therefore The Kingdom Holding Company maintains its 10% share of  Disneyland Paris.

Kingdom Holding Company with it’s 10% share is now the resorts second largest shareholder after The Walt Disney Company which now owns 76.7% of Disneyland Paris.

Source: Kingdom Holding Company

 

Euro Disney recapitalisation Phase 4 to start 1 October 2015

Logo_Euro_Disney_SCAWith Phase 3 of the Euro Disney S.C.A. Cash Tender Offer ending on 24 September 2015,  the results of the cash tender offer will be released on 28 September 2015.

Phase 4 will then begin 6 days later and will last for 30 days.  Phase 4 of the Euro Disney recapitalisation is the anti dilution mechanism, which gives shareholders the right to buy EDL shares at €1.25 in proportion of what they already own.

EDL shares closed at €1.31 on the Euronext yesturday.

Phase 3 of the Euro Disney public offering to close on 24 September 2015

Logo_Euro_Disney_SCAFollowing the ruling by the Paris Court of Appeal on 8 September 2015 the AMF announced today in document number 215C1279 that Phase 3 of the Euro Disney S.C.A. public offering will closed on 24 September 2015.

The AMF’s decision follows the Paris Appeal Courts rejection of the appeal made in April by CIMA (Charity & Merger Arbitrage Fund) against the decision made by the AMF to authorize the Euro Disney mandatory cash tender offer which is part of the Disneyland Paris recapitalization plan by The Walt Disney Company.

The Euronext Paris will publish a detailed timetable for the closure of the offer in due course.

Source: AMF and Association des Petits Porteurs d’Actions EuroDisney.

EURO DISNEY S.C.A. Fiscal Year 2015 Third Quarter Results

Euro Disney S.C.A. have published their results for the third quater of the fiscal year 2015.  The highlights are below and the full report can be downloaded from the Group’s website here.

Logo_Euro_Disney_SCAEURO DISNEY S.C.A.
Fiscal Year 2015

Third Quarter Announcement
Nine Months Ended June 30, 2015

  • Third quarter revenues were up 6% to €360 million and nine-month year-to-date revenues increased 9% to €951 million due to higher guest spending and volumes in both theme parks and hotels.
  • The Group continues to invest in the guest experience, with the new Frozen Summer Fun celebration launching during the third quarter

(Marne-la-Vallée, August 4, 2015) Euro Disney S.C.A. (the “Company”), parent company of Euro Disney Associés S.C.A., operator of Disneyland® Paris, reported today the revenues for its consolidated group (the “Group”), for the third quarter of fiscal year 2015 (the “Third Quarter”), as well as the revenues for the nine months ended June 30, 2015.

Commenting on the results, Tom Wolber, Président of Euro Disney S.A.S., said:

“We are pleased with the solid revenue performance this quarter driven by higher guest spending, attendance and occupied room nights. However, we also continue to incur higher costs reflecting our commitment to invest in the guest experience, which offset the improved resort performance. In June, we launched the Frozen Summer Fun celebration and this, along with our hotel and park refurbishment program, is a continuation of our multi-year strategy to improve the guest experience.

I would also like to recognize our talented team of Cast Members who are fully mobilized on our numerous enhancement projects behind the scenes, as well as those on stage who bring the Disney magic to life and create special moments for our guests.”

REVENUES BY OPERATING SEGMENT FOR THE THIRD QUARTER

Resort operating segment

Revenues increased 6% to €359.1 million, compared to €339.2 million in the prior-year quarter.

Theme parks revenues increased 7% to €209.9 million from €196.4 million in the prior-year quarter due to a 5% increase in average spending per guest and a 2% increase in attendance.

The increase in average spending per guest resulted from higher spending on admissions, food and beverage and merchandise. The increase in attendance was due to more guests visiting from the United Kingdom and France, partly offset by fewer guests visiting from Spain.

Hotels and Disney Village® revenues increased 6% to €141.0 million from €133.5 million in the prior-year quarter due to a 3% increase in average spending per room, a 1.9 percentage point increase in hotel occupancy and a 7% increase in Disney Village revenues. The increase in average spending per room resulted from higher daily room rates and higher spending on food and beverage, partly offset by lower spending on merchandise.

The increase in hotel occupancy was attributed to 10,000 additional room nights sold compared to the prior-year quarter due to more guests visiting from France and the United Kingdom, partly offset by fewer guests visiting from Spain.   The increase in Disney Village revenues was driven by higher spending on merchandise.

Other revenues decreased by €1.1 million to €8.2 million, from €9.3 million in the prior-year quarter, mainly due to lower lease revenues due to the termination of a lease agreement related to office space located in the Walt Disney Studios® Park.

Real estate development operating segment

Revenues increased by €0.1 million to €0.4 million, compared to €0.3 million in the prior-year quarter. During the Third Quarter, the Group’s total revenue growth was offset by an increase in costs and expenses compared to prior-year quarter, mainly due to costs related to the enhancement of the guest experience, costs associated with higher resort volumes, as well as labor rate inflation.

REVENUES BY OPERATING SEGMENT FOR THE NINE MONTHS ENDED JUNE 30, 2015

Resort operating segment

Revenues increased 9% to €950.3 million from €870.1 million in the prior-year period.

Theme parks revenues increased 11% to €551.0 million from €494.7 million in the prior-year period due to a 7% increase in average spending per guest and a 4% increase in attendance. The increase in average spending per guest resulted from higher spending on admissions, food and beverage and merchandise. The increase in attendance was due to more guests visiting from the United Kingdom, France and Spain.

Hotels and Disney Village® revenues increased 7% to €373.9 million from €348.1 million in the prior-year period due to a 3.8 percentage point increase in hotel occupancy, an 8% increase in Disney Village revenues and a 2% increase in average spending per room.

The increase in hotel occupancy was attributed to 60,000 additional room nights sold compared to the prior-year period, resulting from more guests visiting from the United Kingdom and France.

The increase in Disney Village revenues was due to higher resort volumes and higher spending on merchandise. The increase in average spending per room was due to higher spending on food and beverage and higher daily room rates, partly offset by lower spending on merchandise.

Other revenues decreased by €1.9 million to €25.4 million from €27.3 million in the prior-year period, mainly due to lower lease revenues due to the termination of a lease agreement related to office space located in the Walt Disney Studios® Park.

Real estate development operating segment

Revenues decreased by €1.7 million to €1.0 million from €2.7 million in the prior-year period. This decrease was due to lower land sale activity than in the prior-year period. Given the nature of the Group’s real estate development activity, the number and size of transactions vary from one year to the next.

For the nine months ended June 30, 2015, the Group’s total revenue growth was offset by an increase in costs and expenses compared to prior-year period, mainly due to costs associated with higher resort volumes, costs related to the enhancement of the guest experience, as well as labor rate inflation.

UPDATE ON RECENT AND UPCOMING EVENTS

The Jedi Training Academy opens at Disneyland® Paris

Starting July 11, the Jedi Training Academy opened its doors at Disneyland® Paris to aspiring kids aged 7 to 12 to learn to use the Force from a true Jedi Master. Guests visiting Disneyland Paris will also meet the heroes of the epic Star Wars saga through a unique and interactive experience that the whole family can enjoy.

Frozen returns, creating the coolest summer

Since June 1, Disneyland Paris celebrates a Frozen Summer Fun with a brand new show, an ice-themed musical production combining singing and dancing with guest participation. The famous sisters, Anna and Elsa, along with their faithful companions, Kristoff and Olaf the funny snowman, take to the stage to bring the show to life and expand the unique experience of Frozen live.

Mandatory Tender Offer

During the first half of fiscal year 2015, the Company completed share capital increases as part of the Group’s recapitalization and debt reduction plan that was announced on October 6, 2014 (the “Recapitalization Plan”). For more details on the different steps of the Recapitalization Plan, please refer to the press releases and the other documents related to this plan, which are available on the Group’s website (http://corporate.disneylandparis.com).

Following the Company’s capital increases, EDL Holding Company, LLC, Euro Disney Investments S.A.S. and EDL Corporation S.A.S. reported that their interests in the Company crossed certain thresholds. As a result, they were required to launch a mandatory tender offer for the Company’s shares that they did not own (the “Mandatory Tender Offer”). The French Autorité des marchés financiers (the “AMF”) issued its clearance decision (décision de conformité) on this Mandatory Tender Offer on March 31, 2015.

The Company was informed that an appeal against the AMF clearance decision has been filed on April 9, 2015 with the Court of Appeal of Paris (Cour d’appel de Paris). In notices no. 215C0446 dated April 14, 2015 and no. 215C0637 dated May 15, 2015, the AMF has indicated that, pending the decision of the Court of Appeal of Paris, the Mandatory Tender Offer has been extended at least 8 days after this decision. The Court of Appeal of Paris will render its decision on September 8, 2015.

For more details on the Mandatory Tender Offer, please refer to the press release and the other documents which are available on the Group’s website (http://corporate.disneylandparis.com).

CIMA goes to court to stop TWDC takeover of Euro Disney

Logo_Euro_Disney_SCA

The French investment fund Charity & Investment Merger Arbitrage Fund – CIMA, which holds less than 1% of the share capital of Euro Disney, said on Monday it had filed an appeal against the decision of the French Financial Markets Authority (AMF) to authorize the takeover of the US parent unveiled in February.

While The Walt Disney Company has embarked on a complete takeover procedure of the capital of Euro Disney, French assest manger CIMA  considers that the procedure was not conducted in the common interest of the shareholders.

The Walt Disney Company announced on the 20 February that  they now owned up to 72.34% of the capital of Euro Disney S.C.A. as a result of capital increases made in three of its subsidiaries (EDL Holding Company, Euro Disney Investments, and EDL Corporation).

The next stage in the recapitalization of Euro Disney S.C.A. the mandatory tender offer (OPO) on all shares Euro Disney they do not possess  opened on April 2 and was expected to run until to 24 April 2015.  This has now been extended by the AMF until the Paris Appeal Court makes a ruling.

The Fund Charity & Merger Arbitrage Fund (CIMA) on 9 April 2015 filed an action for annulment before the Paris Appeal Court “against the AMF’s decision to declare conformity deposited on the public offer by the Euro Disney SCA Group Walt Disney Company,” according to a statement.

“This public offering completes a  situation of abuse of power in Euro Disney, which is not managed in the common interest of its shareholders or even its own corporate interests,” according to the fund.

 “All these actions appear likely to constitute the abuse of corporate assets offenses to the detriment of Euro Disney, presentation of inaccurate accounts and communication of false or misleading information. A complaint on these grounds was filed by CIMA with the national financial Parquet “, details the CIMA counsel, Mr. Julien Visconti.

The fund also says it plans in the coming weeks to launch an action in civil proceedings “for the return of hundreds of millions of euros improperly levied by the controlling shareholder in Euro Disney.”

On 17 February the shareholders of Euro Disney, meeting at the companies General Assembly approved the one billion euro recapitalize plan by nearly 95%.  Euro Disney has previously experienced financial restructuring in 1994 and 2004.

Source: La Tribune

For French investors, a Euro Disney nightmare

Reuters published the below special report today (Monday 2 February 2015)  on the Euro Disney S.C.A. recapitalization.


Special Report: For French investors, a Euro Disney nightmare
by By Nicholas Vinocur and Alexandria Sage
(Edited by Simon Robinson and Sara Ledwith)

(Reuters) – When Edith Zemirou bought Euro Disney stock two decades ago, she expected a decent return and her own small share in Mickey Mouse magic.

In 1989, the Walt Disney Company announced a public share offering of its young European arm. It was the continent’s largest-ever IPO to that point and analysts said Euro Disney stock promised “good long-term returns.”

Zemirou bought in, and has regretted it ever since. Her original 1992 investment would have lost 95 percent of its value by now. “It’s too bad they didn’t give us paper share certificates,” said the grandmother and former high school principal, who still has 100 shares worth about 3 euros ($3.4)each. “At least we could have framed them, as souvenirs.”

Zemirou says she feels duped. She heads Euro Disney’s investor club (APEAD) and is one of 1,000 or so investors who are furious at the way Euro Disney, which is raising fresh capital in the face of insolvency, has been run. The Paris-listed firm has recorded losses in 16 of its 23 years, despite owning Europe’s top tourist destination with about 14 million visitors per year.

Euro Disney managers say the firm has struggled because initial projections were too optimistic and the park borrowed too heavily. They also blame a lack of visitors, Europe’s weak economy and, in many years, guests who spend too little on food and merchandise.

Shareholders do not dispute there are difficulties, but point to another factor: U.S.-based Walt Disney Company, which owns 40 percent of Euro Disney, extracts tens of millions of euros annually from the European firm by charging it a host of fees and royalties for everything from operating a call center to the use of intellectual property.

Those charges cost Euro Disney around 10 percent of its annual revenue – too much, shareholders say, for it to become profitable. As evidence, they point out that all the years the European firm did turn a profit for shareholders were between 1995 and 2001, a period when Walt Disney Company had suspended most of its charges.

Euro Disney Chief Financial Officer Mark Stead rejects the complaint. Fees, he said, are priced at “market rates” or lower. He pointed to similar fees for Tokyo Disneyland which amount to about 7 percent of its revenue. Disney, which does not own Tokyo Disneyland, would not suspend such charges if a retailer selling its branded products fell on hard times, for instance. Why should it for Euro Disney?

But shareholders say this argument is flawed because Disney, as part-owner of Euro Disney, has a shared responsibility in the firm’s financial well-being. Yet Disney charged further fees and even raised them as Euro Disney fell on hard times.

A Disney spokeswoman said the Burbank, California-based firm had “consistently demonstrated its commitment” to supporting Euro Disney and, in addition to waiving fees in the mid-1990s, had deferred payment on some of its fees.

Multinational firms regularly shift revenue between different divisions to minimize the taxes they have to pay. In Euro Disney’s case, finance experts and shareholders argue that such transfers have been used primarily to channel revenue to one dominant shareholder over others. Those transfers, as well as management mistakes, have led to under-investment in the French theme park, some shareholders say, hurting visitors’ experience.

Broken-down rides, hotels needing renovation, long queues at restaurants and shortened opening hours have dragged down visitor satisfaction, company documents show.

Euro Disney acknowledges the need for new investment. It won shareholder approval on Jan. 13 for a recapitalization plan to cut debt, renovate the park and set it on a firmer financial footing. The Walt Disney Company, which purchased Euro Disney’s debt load from French banks in 2012, says it aims to reduce the 1.7-billion-euro debt to about 1 billion euros and improve Euro Disney’s cash position by about 250 million euros.

Virginie Calmels, head of Euro Disney’s supervisory board, told shareholders that the strategy would “finally put the firm on the path to profitability.”

But some shareholders – there are around 56,000 – no longer trust such assurances.

They are angry that the operation will give the parent company up to 82 percent in Euro Disney. In addition to Disney’s stake, 10 percent of Euro Disney’s equity is held by Saudi Prince Al Waleed bin Talal, and 6 percent by U.S. investment firm Invesco. Both declined to comment. The rest of the equity is held by small shareholders in Europe.

Under terms laid out in a letter to investors last October, Euro Disney proposes that small shareholders triple their initial investment to keep the same stake proportionally. Alternately, they can sell purchase options for new shares and make a small gain. If they do nothing, they will lose money.

“After so many years of losses the fair thing to do would be to buy everyone out at a decent price,” said shareholder Pierre-Alain Le Duc. “Instead they’re taking our shares when they are close to their all-time low and securing the rest of the park’s equity for a bargain.””Last stop, everybody off – that’s what they’re telling us.”

SHAREHOLDERS NOT THE MAIN CONCERN

The trouble at Euro Disney stems from the firm’s origins and ownership structure.

Pierre-Henri Leroy, head of the independent investment advisory firm Proxinvest, says the 1987 agreement that established Euro Disney was made to benefit Disney and the French state, whose main concern was developing a depressed agricultural region east of Paris.In this, Disney was a welcome guest. Some 55,000 jobs in the greater Paris area depend, directly or indirectly, on Euro Disney, making it the largest private employer in the Seine-et-Marne region, according to a 2012 economic study commissioned by the government. The firm has also paid 5.3 billion euros in various taxes to local and national authorities since 1992.

In return, Disney has won a foothold in Europe, a storefront for its merchandise and media properties, and prime access to 500 million consumers.

The U.S. parent company has also made money from its French adventure. Since 1992, royalty and management fees have added up to 975.69 million euros for the Walt Disney Company, according to Reuters calculations based on financial reports. Euro Disney said 285 million euros of that was not paid as of 2014, but still owed to Disney.

Add to that other Related-Party Transactions such as those for developing and building rides, other services and financial charges, and total charges reach at least 1.481 billion euros. Most of that revenue goes to other holding firms in the Netherlands, which has a tax-friendly policy for intellectual property. Disney says such services are crucial to maintain high and consistent standards at Euro Disney.

Over the same period, Euro Disney has incurred total net losses attributable to shareholders of more than 2 billion euros. As a result, it has paid no corporate taxes. Even in its profitable years, Euro Disney used “tax loss carry forwards,” which allow firms that have incurred losses to avoid taxes.

The losses were almost inevitable according to Proxinvest’s Leroy, who is not a Euro Disney shareholder but advised French investment banks and corporations on the stock.”To us it was clear from the start that this was not a good investment,” he said. “I would never have advised anyone to buy these shares because so much money was being taken out through transactions with Disney.”

An official in former Prime Minister Jacques Chirac’s government when the deal was signed said the state had imposed a shared ownership structure out of “patriotic sentiment,” and had not prioritized the protection of European shareholders.”The shareholders were not the main concern,” said Christian Cardon, mayor of Trouville in northern France and former chief of staff for then Transport Minister Pierre Mehaignerie. Disney and the government “didn’t look too closely at the financial setup. If there had been a purely private approach… with major private shareholders, things would have been different.”

WAITING TO PROFIT

The U.S. parent firm uses a corporate structure known as the “societe en commandite par actions,” or SCA. This set-up, used by a handful of firms in France, allows Disney to manage Euro Disney via a 100-percent-owned subsidiary. It charges what Leroy and others call “enormous” fees for Related-Party Transactions including royalties, management, development, maintenance and other services.

These services are not only expensive, but sometimes inefficient, shareholders say. Maintenance and upgrades cannot be performed on most Disney-themed rides, hotels and restaurants, without using Disney-controlled businesses. Shareholder Le Duc cited the example of a hotel inside Disneyland Paris. Staff there were unable to open windows because they had lost their only keys; replacements had to be ordered from the United States.

All the fees add up to around 10 percent of Euro Disney’s revenue. And that’s set to climb even further. As part of Euro Disney’s turnaround plans, one of those charges, the management fee, will rise to 6 percent on Oct. 1, 2018 from 1 percent now. Disney says this will restore it to originally planned levels.

Euro Disney Chief Financial Officer Stead said Euro Disney shareholders were aware of its fees and charges which had “always been disclosed.”

It is not uncommon for parent firms to charge their subsidiaries such fees. Disney says its royalty and management fees are priced at market rates and less than what’s charged by some other sellers of intellectual property. But some theme parks pay much less. Merlin Entertainments, which operates the Legoland park near London, for instance, paid Lego fees and royalties of around 2 percent in 2011 and 2012.

Euro Disney shareholders complain that they have held on to their stock because of repeated assurances from management that it will become profitable in the medium-term. In 2012, CEO Philippe Gas said Euro Disney was “setting the stage for sustained long-term profitability.”

When Supervisory board chief Virginie Calmels and CEO Tom Wolber presented the rescue plans in Paris this month – Calmels said Euro Disney will finally turn a profit in 2019 – guests hectored them with shouting and accusations.

TROUBLING?

Shareholders also point to the fact that Euro Disney made money during the years Disney suspended Related-Party Transactions payments as evidence that the fees are an important cause of the theme park’s losses.

Euro Disney faced its first financial crisis just two years after opening. Walt Disney Company suspended royalty fees between 1994 and 1998, before reinstating them at half the normal rate until 2004. The firm’s profitable years came during this period. Euro Disney warned in its 1995 financial report that reinstating full payment of royalties and management fees would “have a significant impact on the Group’s results of operations.”

That prediction came true. Euro Disney plunged back into the red in 2002, soon after an investment in a second park, Walt Disney Studios. The second financial crunch led to a capital-raising operation in 2004.

At that point, “they should have said: ‘either we stop these fees, or we buy back everyone’s shares at a decent price.’ But instead of that they are coming back for more money,” said Leroy. “Investors have already lost their underwear. I find it troubling.”

A Disney spokeswoman said further deferring or waiving fees would not have substantially improved Euro Disney’s liquidity situation.

Moez Bennouri, a finance professor at Rouen Business School, said one problem is that auditors often struggle to determine the market value of Related-Party Transactions. In Euro Disney’s case, all but one financial analyst has given up reporting regularly on the stock. The last to do so, financial services firm Oddo Securities, works for Euro Disney to help ensure investors can trade in the company’s shares.

A spokeswoman for Oddo said there is a Chinese wall between its brokerage and corporate finance sections.