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| Disney, Shanghai propose new theme park |
| Bloomberg / San Francisco Jan 12, 2009, 00:47 IST |
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Walt Disney Co and the Shanghai government have made a proposal to build a theme park in the Chinese city, the company said.
The bid for a second park in China needs approval from the central government in Beijing, Burbank, California-based Disney said on saturaday in an e-mailed statement.
Chief Executive Officer Robert Iger is expanding in the world’s most populous nation as profit at the company’s parks and resorts division declines because of falling consumer spending. The new site will likely be larger than one in Hong Kong that has faced criticism for being too small, said David Miller, a Los Angeles-based analyst with Caris & Co.
“There is always risk, but this has been in the planning stages for 10 years,” said Miller. “You can bet this is a much larger project.” He rates the stock “above average.”
Disney dropped 59 cents to 22.31 at 4:01 p.m. in New York Stock exchange composite trading Saturday. The shares fell 30 per cent last year.
The proposed project would cost $3.59 billion and could open as early as 2014, the Wall Street Journal reported, citing an unidentified person with knowledge of the terms.
Disney would own 43 per cent of , while a joint-venture company owned by the local government would own 57 per cent, the Journal reported, citing a person with knowledge of the terms.
The first phase, to be built over six years, would occupy 1.5 square kilometers (371 acres) and include a park, a hotel and a shopping development, the newspaper said. A mostly rural site near Shanghai’s Pudong International Airport was chosen.
“Discussions have been on going about the feasibility of a theme park project in China,” Leslie Goodman, executive vice president for public affairs at Walt Disney Parks & Resorts, said in the statement.
Disney will likely pay $300 million to $600 million in capital expenses for the park in exchange for 5 per cent of the ticket sales and 10 per cent of the Shanghai Disneylandoncessions, Miller said.
Parks and resorts are Disney’s second-largest business behind media networks, contributing $11.5 billion in sales, or 30 per cent of the total, in the year ended on September 27.
Profit from parks and resorts fell to $412 million in the fourth quarter from $430 million a year earlier. Sales at the division rose 6.5 per cent to $2.97 billion.
To keep US parks full, Disney has been offering visitors who book four nights an additional three for free, plus a $200 credit to spend on food or merchandise.
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