HONG KONG (Dow Jones)--Hong Kong is close to reaching a deal with Walt Disney Co. (DIS) to expand the city's Disneyland park, a person familiar with the situation said Saturday, in an agreement that will allow the government to keep a controlling stake in the venture.
Disney and the Hong Kong government have been in protracted discussions over financing an expansion to the first phase of Hong Kong Disneyland, which is 54%-owned by the government and 46%-owned by Disney.
At stake in the talks is the government's desire to keep its controlling stake in the theme park, given Disney's willingness to inject capital into the joint venture to fund the expansion.
The person familiar with the situation said Saturday that the sides are very close to a deal. As part of the proposed agreement, Disney will finance the expansion project, while the government will convert earlier loans to the joint venture into equity in order to keep a controlling stake.
The person said Hong Kong Financial Secretary John Tsang met with senior Disney executives in Los Angeles on Friday to discuss the expansion plans, though no agreement was signed during the meeting.
The person declined to provide financial figures for the expansion, but said construction of the expansion will begin soon after the deal closes.
The Hong Kong Economic Times reported Thursday that a likely option would be Disney investing HK$7 billion for the expansion, reducing the government's stake to 51%.
Hong Kong Disneyland is the smallest of Disney's theme parks, and has been criticized for its size and lack of major attractions since its 2005 opening. The company also has parks in the U.S., Japan and France.
Disney said earlier the expansion plans being negotiated involve increasing Disneyland's themed areas by a third of its current size.
Disney officials couldn't immediately be reached for comment.