Merlin taken private in $7.5bn deal

September 2019 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

September 2019 Issue

A consortium including private equity giant Blackstone, the Canada Pension Plan Investment Board (CPPIB) and KIRKBI, an investment vehicle controlled by the founding family of the Lego brand, have agreed a deal to acquire Merlin Entertainments for around $7.5bn, about 12 times the company’s earnings before interest, tax, depreciation and amortisation (EBITDA) of $627m.

The deal, which will take Merlin off the stock market, is one of the biggest European private equity deals in recent years, and will allow the company to invest more in its assets and deliver on growth plans.

The 455 pence per share offer is the third attempt by the group led by KIRKBI to take Merlin – the theme park operator which runs the Legoland attraction, Madame Tussauds and the London Eye – private, having unsuccessfully proposed a price of 425 pence. Merlin floated at 315p in 2013.

KIRKBI, the investment vehicle of the descendants of Ole Kirk Kristiansen, the founder of the Lego group, has had a 29.5 percent stake in the theme park operator since the sale of Legoland Parks to Merlin in 2005. Its stake will rise to 50 percent after the deal completes. The other half of Merlin will be jointly owned by Blackstone and CPPIB. The deal will also see the consortium assume $1.1bn of Merlin’s outstanding debt.

Shares in Merlin have suffered in recent years, falling below their IPO price following a 2015 accident on a rollercoaster at the firm’s Alton Towers theme park and the 2017 terrorist attacks in London. In May, activist investor ValueAct Capital called on Merlin to take itself private given the level of investment needed in the company. Those calls appear to have been heeded.

For Blackstone and KIRKBI, the deal to acquire Merlin is something of a homecoming. In 2005, Blackstone paid $105m to acquire the company, with KIRKBI also taking a 30 percent stake in the firm. The sale of Legoland Parks was used to help pay down debts and ultimately save Lego, which was facing a very real threat of bankruptcy thanks to declining sales.

The company launched a $5.6bn IPO in 2013 which saw Blackstone’s stake in the company valued at over $1bn. Today, Merlin is the second largest family entertainment company in the world with over 130 attractions, globally.

“As the long-term owner of the Lego brand and as a strategic shareholder in Merlin since 2005, we have great pride and passion for this amazing company, its management team and its employees,” said Søren Thorup Sørensen, chief executive of KIRKBI. “With a shared understanding of the business and its culture, we believe that this group of investors has the unique collective resources necessary to equip Merlin, including the Legoland Parks and Legoland Discovery Centres, for their next phase of growth. We are committed to ensuring Legoland and the other activities in Merlin reach their full potential, which we believe is best pursued under private ownership, in order to deliver fantastic experiences to visitors of all ages around the world.”

“We are pleased to partner with KIRKBI and CPPIB to acquire a business we know very well,” said Joe Baratta, global head of private equity at Blackstone. “We are prepared to commit the substantial resources required to support the long-term objectives of Merlin, which will require significant investment to ensure its long-term success. We believe we are uniquely placed through our Core private equity strategy to make this investment alongside our partners at KIRKBI and CPPIB. We look forward to backing Nick Varney and his strong management team in driving Merlin into the future.”

“Merlin has established itself as a globally diversified, world-class operator of themed attractions and entertainment,” said Ryan Selwood, managing director and head of direct private equity at CPPIB. “Its ability to partner with a number of leading global brands to deliver high-quality family entertainment has been key to Merlin’s success. Through close collaboration with our partners, we look forward to promoting the steady growth, long-term capitalisation and continued international expansion of this business, which aligns well with CPPIB’s long-horizon investment strategy.”

Richard Summerfield