Owner of Legoland and Madame Tussauds is selling itself for $6.1 billion

SAN DIEGO, CA June 29th, 2018 | This is a lego shark in the entrance area of the new ride at Legolan
A Lego shark at Legoland in Carlsbad, Calif., in 2018.
(Eduardo Contreras / San Diego Union-Tribune)

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 said Friday that the Danish family behind the Lego empire agreed to buy it in a joint offer with private equity firm Blackstone Group 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.

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 and based in Britain, 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. The Legoland park in Carlsbad, near San Diego, pre-dated that acquisition and has since seen considerable expansion.

Merlin has said it sees room to increase the number of Legoland parks to 20. The company has doubled capital spending in the last five years, leading debt to swell to about $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 the hands of private 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.

ValueAct Capital, which also lobbied for change at Britain’s Rolls-Royce Holdings, 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 March 26 he was leaving the toymaker’s board as he hands more power over to the fourth generation of the dynasty. He and his three children have a combined fortune of about $22 billion, according to the Bloomberg Billionaires Index.

Merlin shareholders would receive 455 pence (about $5.77) a share, a premium of 15% over the closing price Thursday. The shares rose 14% on 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,” Sunderland said. The bidders made four unsolicited approaches, the first of which was in May before ValueAct’s letter, he said.

Merlin has had a number of setbacks in recent years, including an approximately $6-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 Madame Tussauds wax museums, Peppa Pig World of Play centers and the London Eye Ferris wheel. It is building 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 totaled $43.4 billion, according to data compiled by Bloomberg. Activity has accelerated with recent transactions such as KKR & Co.’s move to buy out minority shareholders in German publisher Axel Springer.

Takeover speculation has helped propel Merlin’s stock in recent months. Shares of the 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” in the Legoland deal, Morgan Stanley analysts said in a note.

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