Perhaps ZSUNE will supply the Mickey Mouse Ride: "Hong Kong, Disney, Agree to Build $3 Bln Theme Park Burbank,California, Nov. 1 (Bloomberg) - The Hong Kong government and Walt Disney Co. agreed to build a $3 billion theme park, bolstering the media company's access to China's 1.2
billion consumers, government officials said. Hong Kong Chief Executive Tung Chee-hwa will announce details of the plan tomorrow. Shares of Disney fell 1 5/16 to 25
3/16 in early trading.
The agreement follows more than six months of talks and was
reached three hours after a midnight deadline set by the two
sides in June. Disney, the world's second-largest media company
has theme parks in the U.S., Japan and France. Hong Kong wants to
attract development from U.S. companies as the former British
colony seeks to shake off the aftereffects of its worst recession
in a generation by luring more tourists.
``It now looks like they've been able to strike a deal that
makes sense,' said Alan Gould, an analyst at Gerard Klauer
Mattison, who has a ``hold' rating on Disney shares. ``Opening
up a park in China has been a long-standing goal of the
company.'
Disney has struggled under Chairman and Chief Executive
Michael Eisner, and its stock has lost 16 percent of its value so
far this year. Its fiscal third-quarter profit rose less than 1
percent, as slower merchandise sales and marginal gains in
broadcasting offset growth at its theme parks.
The park will be Disney's first in Asia outside Japan and
give it a foothold in the potentially huge Chinese market without
exposing it to the vagaries of doing business in mainland China.
Shanghai, China's main commercial center, said at one point it
was vying for the project.
Helping Hong Kong
``It has the potential to really turn around confidence at
street level in Hong Kong,' said Ian Perkin, chief economist at
the Hong Kong General Chamber of Commerce. ``For tourism, it will
make people stay longer and eventually draw in more visitors.'
The Hong Kong theme park is likely to boost revenue at other
companies. HKR International Ltd., a real estate developer, and
Citic Pacific Ltd., a China-backed investment company, could
benefit because they own Discovery Bay, a large suburban
development near the planned park.
Hong Kong's benchmark Hang Seng Index rose 8.3 percent
during the last 10 days, fueled by speculation that a pact was
imminent. It rose a scant 0.5 percent today to 13,322.11 points
after the government said talks had been completed.
By some estimates, the park, to open in 2005, would boost
Hong Kong's gross domestic product by as much as 1 percent a
year.
With Hong Kong's economic growth at 0.7 percent in the
second quarter of 1999 -- after five consecutive quarters of
contraction -- and the jobless rate only 0.2 percentage points
below its record high of 6.3 percent, the city can use all the
help it can get.
Money Talks
A lingering problem may be money. While most members of Hong
Kong's 60-seat Legislative Council are appointed or indirectly
elected and are friendly to the government, most will be on the
lookout for an agreement that gives too much away to Disney, a
famously tough negotiator.
``The question is, what is the cost?' said Eddie Wong, an
economist at ABN Amro in Hong Kong.
Disney officials declined to comment before tomorrow's
announcement. Hong Kong Tourism Commissioner Mike Rowse, the
government's lead negotiator with Disney, also declined to
comment.
People involved in the negotiations have said the Hong Kong
government is ready to lend the new Disney Park as much as $800
million and provide $1.5 billion in land and infrastructure in
exchange for about a 55 percent stake in the attraction. Disney
would have to contribute about $250 million for about a 45
percent stake.
Hong Kong has about $90 billion in reserves and can amply
afford to spend money on the park.
The government's share would include the cost of reclaiming
400 acres of land and building transport links between the
isolated island site and the airport and other parts of the city.
Disney's Struggles
Disney's messy legal battle with former studio chief Jeffrey
Katzenberg over a disputed bonus hasn't helped either. The
company settled with Katzenberg in July for an estimated $250
million. The lengthy trial was a distraction for Eisner and other
top Disney executives.
Besides its namesake parks in tourist hot-spots such as
Florida and California, Disney operates a cruise ship business
and retail stores. Its ABC unit was the third-most watched
television network during prime-time in the last round of
ratings, announced Oct. 26.
Taking a minority stake in the park wouldn't be a new
strategy for Disney. Tokyo Land Corp. is its partner for Tokyo
Disneyland, and Disney owns about a 39 percent stake in
Disneyland Paris, for which the French government provided free
land and a 30-kilometer commuter rail link.
Rowse has previously dismissed speculation that Cheung Kong
(Holdings) Ltd. and Sun Hung Kai Properties Ltd., the city's two
largest developers, would be brought in as partners for the
project -- at least not right away. Rowse said about a month ago
that such a step would be premature.
The park's economic impact will start next year, when the
government begins filling in Penny's Bay, a cove on Lantau Island
northwest of the city's center and near Hong Kong's new airport
at Chek Lap Kok.
The city has already rezoned the area, to be filled in from
Penny's Bay on the western tip of Lantau Island, for use as a
theme park. The Mass Transit Railway Corp., the government-owned
subway system, has begun looking at how to build a branch line to
the park. |
