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Lego, Blackstone set to purchase Merlin Entertainment

GuyWithAStick

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Leisure group Merlin Entertainments, best known for Legoland Resorts and Madame Tussauds wax museums, is set to be acquired in a £6bn deal by the Danish billionaire family that controls toymaker Lego, private equity group Blackstone and a Canadian pension fund. According to multiple people close to the matter, a deal is expected to be announced for the FTSE 100 company as soon as Friday morning. These people cautioned that no deal was guaranteed until the announcement and that the timing may slip.
One of these people said the deal is likely to value Merlin’s shares at around 460p, a premium of more than 18 per cent to its closing price of 395p on Thursday. At that level, the offer will value Merlin shares at more than £4.7bn. The company has net debt of roughly £1.2bn, giving it an enterprise value of close to £6bn.
The transaction will see Kirkbi, the investment vehicle of Lego’s founding family, which owns close to 30 per cent of Merlin shares, team up with Blackstone and Canadian pension fund CPPIB. Among its holdings, Kirkbi owns a 75 per cent stake in Lego. Merlin, Kirkbi and Blackstone did not immediately respond to a request for comment. CPPIB declined to comment.
A deal would mark one of the largest European buyouts in recent history and comes at a moment when private equity funds are flush with cash and looking at bigger targets. It would also come a month after US activist hedge fund ValueAct said the market was undervaluing the business and that Merlin should seek a buyer to take it private. Recommended Lex: premium commentary Private equity: winners cursed In an open letter to the chairman of Merlin, ValueAct said that “private ownership is simply better placed than current public shareholders to underwrite the investments Merlin must make”. The hedge fund owns just over 9 per cent of Merlin’s stock.
Shares of Merlin, which have climbed by more than a tenth since ValueAct’s public agitation for a sale, remain below an all-time high set in 2017.
Merlin’s roots date back to 1979 and its opening of a single aquarium in Scotland. The group expanded across the UK and continental Europe before its management group led a buyout of the company in 1999.
It then changed hands in 2004 and 2005, first to private equity group Hermes and then to Blackstone and Kirkbi. In 2013 it was listed on the London Stock Exchange at 315p per share. A serious accident on a rollercoaster at its Alton Towers attraction in 2015 and the London terror attacks in 2017 both caused sharp drops in the share price. The potential transaction comes during a boom time for private equity groups as dealmakers rush to deploy a roughly $2.5tn cash pile. New figures from Refinitiv showed the value of leveraged buyouts rose to $256bn during the first half of the year, the second-largest first-half on record. The build up of capital has led to private equity groups to be more aggressive in their acquisitions, which in return has pushed prices up on deals and triggered fears of a bubble in the sector.
Oooh, what a twist!
 

davidm

Well-Known Member
It's all a bit funny money* this sort of thing, as that says they already owned a lot / previously owned it all.

Very interesting though.

* "funny" as in just because they spend 6billion on the thing doesn't mean Alton and Thorpe are getting B&M gigas next season. Different sort of money.

on BBC news now too ; https://www.bbc.co.uk/news/business-48797245

Smacks a bit of the Lego-family just wanting their parks back ;-)
 
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ukthemeparkfan

New Member
It's all a bit funny money* this sort of thing, as that says they already owned a lot / previously owned it all.

Very interesting though.

* "funny" as in just because they spend 6billion on the thing doesn't mean Alton and Thorpe are getting B&M gigas next season. Different sort of money.

on BBC news now too ; https://www.bbc.co.uk/news/business-48797245

Smacks a bit of the Lego-family just wanting their parks back ;-)
then why did they not just buy back the legoland parks
 

TPSou

New Member
I think Merlin was told to find a buyer by an investment group that owns a chunk of them and the group that owns Lego already had the money and the relationship in place.

Does mean a potential for more investment though, just hard to predict where that investment would go, could be Madame Tussauds or just the legolands.

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spicy

Active Member
Interesting didn’t see this coming.

But yea to echo others I think this is Lego wanting their Legoland brand back and the rest of Merlin comes with it.

Maybe the Lego parks could become independent away from Merlin?

I’d love to suggest this could see the end of the Merlin budget cutting we have seen across the parks but I don’t think it does.
 

JoshC.

Active Member
I'm no financial expert so I may end up talking bull, but..

I think the big takeaway from this is that Merlin are going back to becoming a private company rather than a PLC. Becoming public felt like a bad idea at the time, and doesn't seem to have proved fruitful for anyone.

I'm under no doubt that over the past few years, there's been plenty of plans for investments within Merlin that have stopped / fell through over concerns about if they'd get enough money back to appease the investors. If they were still private, maybe things would have been different? It's impossible to say, and difficult to say if that could change in the future. So yeah, who knows.

However, we all know that Merlin have plenty of issues right now, and this (rather unexpected) development isn't going to magically fix them overnight.
 

Matt N

Well-Known Member
Maybe the Lego parks could become independent away from Merlin?
The consortium has already said in a statement on Merlin's website that they do not wish to split the company up; all parts of it will remain together, as KIRKBI believes that it has the skills to manage all areas of Merlin.
 

Dar

Member
Could be interesting to see how visible Lego is on resort branding outside legoland parks. They'll probably keep the Merlin brand in some fashion to give them some distance from the more adult themes and events that happen from time to time
 

Pokemaniac

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I think/hope that the company likely going private will increase investments across the chains. Will Nick Varney still be at the head?
Would they really swap out the entire management, though? It could simply be that this only affects who the money goes to at the end of the line, with very little to change on an operational or even a strategical level. There would just be a different address on the envelope with money sent upstream from Varney's office.
 

Lofty

Social Media Team
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They could. With them then having more ownership and therefore control over the business, it is extremely possible that they could change the senior management and director team around. It all depends on how much involvement the investment team actually wants - if they want a really successful set of parks and they have aims to invest and change direction from what's happening at the moment, it would be pretty likely that a reshuffle would happen. Whereas if they just wanted capital from the purchase then the chances of really anything happening are extremely slim.
 

TPSou

New Member
Nemesis as Lego bundle LET'S GO
If they make Lego sets of Merlin attractions I'm going to be a very poor man. Stealth, Oblivion, Nemesis, Tidal Wave, the Colossus statue, I want them all.

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