Goldman to take majority stake in USJ

Goldman Sachs is set to become the leading shareholder in Universal Studios Japan (USJ), by providing the struggling theme park with Y20bn (US$180m) in capital.

The investment fits into Goldman Sachs’s growing leisure portfolio in Japan. The investment bank is the second-largest golf course owner in the country, after US-based private equity firm Lone Star. It also said earlier this year it would buy and renovate about 50 onsen, or hot spring resorts, with a local partner.

The leisure investments by Goldman in recent years underline the narrowing profit margins in Japan for traditional investment banking businesses, such as brokering mergers and acquisitions or underwriting public offerings.

Universal Studios Japan, which is located in Osaka, said it would issue Y20bn worth of non-voting preferred shares to Goldman and Y5bn to the state-affiliated Development Bank of Japan (DBJ).

The move would make Goldman the top USJ shareholder with a 46.5 stake, followed by the DBJ, which will have a 11.6 per cent stake and the city of Osaka - currently its leading shareholder - which owns 10.5 per cent.

Goldman said on Wednesday: “This is the only major theme park in the Kansai area, which is the second-largest economy in Japan. The theme park business of Universal Studios is accepted globally and well-accepted in Japan.”

As part of the deal, Goldman will be allocated two USJ board seats and the DBJ will receive one.

USJ, which operates “Jaws” and “Jurassic Park” rides at its theme park in Osaka, said the capital would be used to pay down its bank debt of Y81.4bn, and the Y23bn it owes the city of Osaka.

Though the theme park opened to much fanfare in 2001, it has been in the red every year. The number of visitors peaked in 2001 at 11m, declining to 8.1m in the year ended March 2005. Its cumulative losses have reached Y31.69bn. Unlike Disneyland, Japan’s most successful theme park, USJ has had trouble attracting repeat and international visitors.

A series of minor mishaps also bedevilled USJ - there was a botched food labelling problem in 2002 and problems with its fireworks, in which incorrect amounts of gunpowder were used. Though small, these problems were not disclosed immediately and USJ was accused of covering up the problems, which also affected visitor traffic.

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