We’ll all own a few bricks of Legoland
CPP joins Blackstone, Danish family to make offer
The owner of Legoland theme parks aims to go private in a $6.1-billion (U.S.) buyout, seeking to invest more in worldwide expansion and attract new fans of the plastic bricks in markets such as China.
Merlin Entertainments Plc said Friday that the Danish family behind the Lego empire agreed to buy the company for about 4.8 billion pounds ($8 billion Canadian) in a joint offer with private equity firm Blackstone Group LP and Canadian pension fund CPPIB. The deal continues a run of blockbuster private equity transactions in Europe as cash flows into buyout funds.
The descendants of Lego founder Ole Kirk Christiansen are moving to increase their involvement in the theme park business, which the family sold off to Blackstone in 2005. Merlin has been aiming to double its Legoland network even as debt swells and tourist visits slow down.
The buyout “will be very supportive of the development of the Legoland brand,” Merlin Chairman John Sunderland said in a phone interview.
Founded in 1999, Merlin runs more than 120 attractions in 25 countries under formats including Sea Life and Peppa Pig. Since Merlin acquired the rights to Legoland 14 years ago, the company has built a network eight parks under that moniker in locations including Florida, Dubai and Malaysia.
Merlin has said it sees room to increase the number of Legoland parks to 20. The
company has doubled the level of capital spending in the past five years, shelling out $421 million last year as part of a longterm expansion plan through 2030.
That has weighed on Merlin’s debt, which has swelled to $1.5 billion. Both Standard & Poor’s Financial Services and Moody’s Investors Service have junk ratings on the borrowings.
Investors had pushed the company to consider a sale, saying it would be worth more in private hands, where owners can take a longer view on capital outlays. The Merlin bid is one of several recently in which buyout groups have moved to retake control of a company they previously owned, with targets getting scarcer and cheap financing readily available. After the 2005 deal, Blackstone led a 2013 initial public offering of Merlin.
ValueAct Capital, which also lobbied for change at Britain’s Rolls-Royce Holdings Plc, last month sent an open letter to Merlin’s board saying that it needs to spend more on new hotels and Legoland parks, which would be hard to do as a public company. The activist investor, which rarely comments publicly on its investments, has accepted the offer.
Merlin shareholders would receive 455 pence per share, a premium of 15 per cent over the closing price Thursday. The shares rose 14 per cent to 450 pence Friday morning in London.
The Merlin bid is 37 per cent higher than the closing price on the day before ValueAct’s letter. It values the company at about 12 times Merlin’s 2018 underlying earnings before interest, taxes, depreciation and amortization.
“We regard this as a very attractive offer,” Chairman Sunderland said. The bidders made four unsolicited approaches, the first of which was in May before ValueAct’s letter, he said.
Merlin Entertainments has had a number of setbacks in recent years, including a $6.3 million fine following a 2015 accident at its Alton Towers theme park in the U.K. that injured customers on one of its rides. The Brexit vote a year later hampered its growth potential. A Legoland being built in Goshen, N.Y., has suffered from regulatory and construction delays.
The company also oversees attractions such as Peppa Pig World of Play and the CocaCola London Eye. The company also plans another Legoland in South Korea and is looking for sites in China, where it would like to run three by 2030, Sunderland said.
Private-equity buyouts targeting European companies and announced this year have totalled $43.4 billion, according to data compiled by Bloomberg. Activity has accelerated with recent transactions like KKR & Co.’s move to buy out minority shareholders in German publisher Axel Springer SE.
The private equity industry — including real estate, debt and venture funds — is sitting on about $1.4 trillion in unspent cash as institutional investors pour client money into funds seeking returns, according to data compiled by Bloomberg.
Takeover speculation has helped propel Merlin’s stock in recent months. Shares of the Dorset, England-based company were up 24 per cent this year through Thursday’s close.