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NEWS: Merlin Entertainments explores possibility of IPO

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Merlin Entertainments Group, the private-equity-backed owner of Legoland theme parks and attractions such as Madame Tussauds wax museums, is preparing to go public in either London or New York and has been meeting with potential investors, its chief executive said recently.


Merlin, the world's second-largest attraction operator, trailing only Walt Disney Co., had revenue of more than $1.5 billion last year and was valued at $3.41 billion back in 2010.


"We are definitely now considering our options," Chief Executive Officer Nick Varney told Reuters last week. Varney said a sale would allow the British company to pay down debt and would help fund further expansion in the U.S. and Asia.


Merlin is owned by the Danish investment company Kirkbi A/S, which controls Lego Group, and by private-equity firms Blackstone Group, which owns SeaWorld Parks & Entertainment, and CVC Capital Partners, whose diversified holdings include U.S.-based luggage maker Samsonite and warehouse-club operator BJ's Wholesale.


Kirkbi has a 36 percent stake, Blackstone has 34 percent and CVC has 28 percent.


Varney said that, with the summer months being Merlin's key trading period, the group would likely make a decision toward the end of summer, with an initial public offering possible late this year or early in 2014.


"We've been putting a lot of work into preparing the ground and making sure that, if we do [an IPO], … we can move relatively quickly and with people knowing and feeling comfortable about what they are dealing with," he said.


Merlin opened Legoland Florida, its second U.S. Legoland theme park, in October 2011 in Winter Haven, and has expanded it several times since.


The company opened seven new attractions in 2012, raising its total to almost 100 spread across four continents. It plans to open another six this year, including a Sea Life aquarium in Manchester, England, and a Legoland discovery center in New York. It is also working on a Sea Life attraction and a Madame Tussauds in Orlando as part of a complex called I-Drive Live on International Drive.


Varney said the company, which currently generates 20 percent of its revenue in the U.S., would prefer to list its stock in London but was also considering New York. He declined to comment on how much Merlin might be worth. Disney shares have been trading at 16.4 times its prospective earnings for 2013.


SeaWorld Parks & Entertainment, also backed by Blackstone, also filed with U.S. regulators for an initial public offering late last year.


"It's good that the market seems to be opening again. It's been closed for a long time. There does seem to be a lot of appetite," Varney said.

Edited by jedimaster1227
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I didn't even realize all of their owners were investment firms. No question there's going to be an IPO, and soon after those firms will be throwing their shares on the market.

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After deciding against a market debut in New York, Blackstone Group LP, CVC Capital Partners Ltd. and Kirkbi A/S, owners of Merlin Entertainments Group Ltd., decided to take the theme park business public in London's stock market next year, sources with knowledge of the deal said.


The private-equity firms plans to proceed with a market debut in London after talks with Merlin's executives, the sources said. The private-equity firms, which each having about a third of the Poole, England-based company, hired Citigroup Inc., Barclays Plc , Morgan Stanley & Co., and Goldman Sachs Group Inc. as underwriters for the offering, the sources added.


Merlin, which operate the London Eye and Madame Tussauds, could have the initial public offering in the first quarter of 2014 in an sale that may value the company at more than GBP3 billion (US$4.5 billion), the sources said, requesting not to be identified because the discussions are private.


Representatives for each of the identified underwriters Citigroup, Barclays, Morgan Stanley, Goldman Sachs Group declined to comment.

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Merlin Entertainments Group Ltd., the private-equity backed owner of Madame Tussauds and the London Eye, plans to raise 200 million pounds ($324 million) selling shares in a London initial public offering.


Blackstone Group LP (BX), CVC Capital Partners Ltd. and Lego Group owner Kirkbi A/S are also expected to sell part of their stakes in the offering, the company said today in a statement. The owners are seeking an enterprise value, or the sum of Merlin’s equity and net debt, of about 4 billion pounds, according to two people familiar with the matter, who asked not to be identified because the sale has yet to be completed. A London-based company representative declined to comment on the valuation.

Merlin comes to the market in a year when IPOs on European exchanges have raised about $17 billion, according to data compiled by Bloomberg, compared with $10 billion in the same period of 2012. Private-equity shareholders including Terra Firma Capital Partners Ltd. and Permira Advisers LLP are selling their stakes in companies via London IPOs as investors return to Europe’s markets on the strength of an economic recovery.


Merlin, which also runs Legoland parks, said it will use proceeds of the IPO to repay debt and cover the expenses.


“The directors of Merlin believe that the global offer will position Merlin for the next stage of its development by providing the appropriate long-term ownership structure,” the company said in the statement. “The global offer will also assist the group in retaining and incentivising employees.”


Net Debt

Merlin, which had net debt of about 1.3 billion pounds at the end of 2012, abandoned a sale to the public three years ago in favor of selling a stake to CVC, and opted against a New York IPO earlier this year, people familiar with the matter said.


Merlin said today that revenue rose 11 percent to 889 million pounds in the 35 weeks ended Aug. 31, or 7.1 percent on a comparable basis. The company is developing a Legoland site in Dubai and has identified potential locations in Japan and South Korea. It also has longer term plans to expand in China.


At least 20 percent of the shares will be publicly traded after the IPO. Kirkbi, which owns 75 percent of the Lego Group, “intends to remain a long-term strategic shareholder.”


Goldman Sachs Group Inc. and Barclays Plc, along with Morgan Stanley, Citigroup Inc., HSBC Holdings Plc and Unicredit Bank AG are managing the Merlin IPO, according to today’s statement. Lazard Ltd. is financial adviser.




Merlin Entertainments, the company that owns a raft of popular tourist attractions, today announced it is planning to issue shares to the public - but with a sizeable shareholder perk.


The company, the world's second largest visitor attraction operator behind Walt Disney, has offered discounted tickets, at 30pc, to any of its attractions for investors who are willing to buy £1,000 worth of shares.


Merlin operates 99 attractions in 22 countries. Its well-known sites include Legoland, Alton Towers, Chessington, Thorpe Park and Madame Tussauds.


The share offer will see 20pc of the company pass to public investors.


Sir John Sunderland, the company's non-executive chairman, said: "Over the past decade Merlin has become a truly impressive business, driven by a committed and dedicated management team and backed by supportive shareholders.


"I have been impressed by the significant growth that Merlin has delivered as a private company. But there is more to come and I believe Merlin has a very promising future as a publicly listed company."


Full details of the share offer will be released in the coming weeks.


The decision to offer the shareholder perk marks a trend to attract investors with a perk. Once popular, shareholder perks had been on the decline for the last decade. But more recently, companies have offered "loyalty bonds" direct. Customers become investors, usually in return for income paid in cash as well as some other perks (more on this below).


How much will I save?


Investors who buy £1,000 worth of shares will be given a 30pc discount on either two adult Merlin Annual Passes, which cost £119 each, or one family Merlin Annual Pass, priced from £356 for a family of four.


A typical family will save £107, which represents a theoetical loyalty yield of 10.7pc for £1,000 worth of shares.


Of course, the reason to buy the shares for the perks only applies if you wanted to buy a Merlin pass. Investors should also be aware they are are gambling their capital on the fortunes of the company.


For most people - occasional visitors of Merlin - the discount is unlikely to be worth it for the money they save versus the risk they would be taking. It's also worth noting that a large of the visitors to these theme parks do so using money-off vouchers, such as two for one deals dished out frequently by supermarkets or by cashing in Tesco Clubcard Boost points.

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Sounds like this is one of those deals similar to the Sea World deal: "repay the debt" to the companies that already own them?

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Yeah, this sounds like a "sequel" of sorts to the SeaWorld Parks IPO earlier this year. BTW, Blackstone Group owns Merlin Entertainments and SeaWorld Parks, so this is not surprising.


What I would like to see is a merger between Merlin and SeaWorld, which would consolidate Blackstone's amusement companies into one. It would be a good marriage, as they both operate sets of parks and attractions that have a high emphasis on quality. They could name the newly-merged company "Merlin Entertainments" and have the world headquarters in Orlando, Florida (where SeaWorld Parks' headquarters is already located). Then, divide their global amusement empire into three divisions: North America, Europe, and Asia-Pacific.

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The Lego family and Blackstone have bought out / back Merlin Entertainments, and Merlin will be a private company again. The Lego family will now own the Legoland parks, but they already had a 30% stake before, so operations shouldn't change too much.


As for Alton Towers, Thorpe Park, etc... They've maintained that they have no intention of selling. So, business as usual.





The owner of Legoland theme parks aims to go private in a $6.1 billion 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 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.


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 of eight parks under that moniker in locations including Florida, Dubai and Malaysia.


Buyout speculation has helped lift Merlin shares this year

Merlin has said it sees room to increase the number of Legoland parks to 20. The company has doubled capital spending in the past five years, leading debt to swell to 1.2 billion pounds. 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 the hands of private hands owners who 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 an investor group that owned Merlin for eight years prior to a 2013 initial public offering.


Activist Investor

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.


The Kirk Kristiansen family, one of Denmark’s richest, would increase its stake in Merlin to 50% from about 30% through the Kirkbi investment vehicle. Kjeld Kirk Kristiansen, the grandson of Lego’s founder, announced on March 26 he was leaving the toymaker’s board as he hands over more power to the fourth generation of the dynasty.


Kjeld and his three children have a combined fortune of about $22 billion, according to the Bloomberg Billionaires Index.


Merlin shareholders would receive 455 pence per share, a premium of 15% over the closing price Thursday. The shares rose 14% to 449.8 pence Friday in London.


The Merlin bid is 37% 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 5 million-pound 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, New York, has suffered from regulatory and construction delays.


The company also oversees attractions such as Peppa Pig World of Play and the Coca-Cola London Eye. The company plans another Legoland in South Korea and is looking for sites in China, where it would like to run three by 2030, Sunderland said.


European Targets

Private-equity buyouts targeting European companies and announced this year have totaled $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.


Takeover speculation has helped propel Merlin’s stock in recent months. Shares of the Dorset, England-based company were up 24% this year through Thursday.


“The backing of an anchor shareholder, Kirkbi, would seem to us to limit the chance of a successful counter-bid,” Morgan Stanley analysts said in a note.

Edited by jedimaster1227
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