Theme Park Ride Over for Lego as Buyer Steps Up

Legoland has a new landlord.

Blackstone Group, a New York investment firm, said Wednesday that it had agreed to buy Lego Group’s four family entertainment parks, including one in Carlsbad in San Diego County, for $457 million.

The sale follows Blackstone’s $187-million acquisition in May of Merlin Entertainment Group, a London company that operates 28 tourist attractions in eight European countries under the Dungeons, Sea Life, Seal Sanctuary and Earth Explorer brands.

Blackstone said it planned to combine the two businesses and keep a 70% ownership stake, subject to approval by European Union competition authorities. Lego would hold the remaining 30%.

Blackstone owns half of the Universal Studios theme park in Orlando, Fla.

Lego put its theme parks in California, England, Germany and its home country, Denmark, on the block this year after suffering a record loss in its toy business.

Last year Lego posted a net loss of about $335 million as its toy sales declined in the face of growing competition from China. The company is restructuring to focus on its core business: colored plastic building blocks.

Blackstone, which is buying the Legoland properties through a $6.45-billion investment fund it manages, should be able to provide enough capital to improve the parks, said Carl Winston, director of the hospitality and tourism management program at San Diego State University.

“You have to keep upgrading” to stay competitive in the theme park business, he said.

Blackstone spokesman John Ford declined to discuss possible spending on improvements and new attractions at the Legoland parks but said hotels might be added to the mix.

Lego operates a 176-room hotel next to its property in Billund, Denmark, and developer Grand Pacific Resorts of Carlsbad is expected to break ground next month on a 700-room hotel near the California park, with its first phase to open by early 2007.

“We’re looking at all the options,” Ford said.

Carlsbad Legoland spokeswoman Kim Clark said stores and restaurants also could be grouped around the park to increase its profile as a family leisure destination.

Other possible additions include Merlin’s educational Sea Life and Earth Explorer attractions.

The 128-acre Carlsbad Legoland site is built out, but 15 acres are set aside for possible expansion of the theme park, Clark said.

The park attracted almost 1.5 million visitors last year, she said, and no layoffs are expected among the 1,000 employees.

“The new owners have a track record of growth,” she said, “and we’re excited about being a part of that and moving Legoland to the next level.”

Industry observers said Legoland’s operations could benefit from new expertise and financing.

“Their marketing budget is a little on the light side,” said John Cora, chief executive of VisionMaker, an Orange-based development and management company for the leisure industry that also bid on the Legoland parks. “They just opened a new ride” and few people realize it, he said, referring to Knights’ Tournament.

Improving the parks and increasing attendance also would make them more valuable if Blackstone decided to sell them, Winston of San Diego State said. Blackstone acquired 35% of Six Flags Inc.’s chain of theme parks in 1991 and sold its stake in 1993.

“If you look at their history,” Winston said, “odds are that Blackstone will ‘flip’ [Legoland] at some point.”