British based Leisure Group Merlin Entertainment plc operates attractions, hotels and hotel villages across many countries. It is best known for Legoland Resorts, Madame Tussauds wax museums and the London Eye. Last year, it had 67 million visitors at its 120 attractions across 25 countries. CNBC mentioned that it is the world’s second-largest operator of visitor attractions after Disney.

Lego’s founding family, private equity group Blackstone and a Canadian Pension fund revealed on the 28^th of June 2019 that it would pay 455p in cash per share, a premium of 15% over its previous day closing. This offer values Merlin at 4.7bn pounds or close to 6bn pounds including debt. The buyers already own considerable stakes in Merlin.

Over the past 5 years, Merlin’s shares have been performing poorly. A serious accident on a rollercoaster at its Alton Towers attraction in 2015 and the London terror attacks in 2017 caused sharp drops in the share price.

Brexit has not been helpful for tourism prospects. Over the past year, sales at Legoland resorts have flatlined while booking sites such as TripAdvisor revealed that parks were too expensive.

The main reason for going private would be to focus in the long-term investments required necessary for building capital intensive parks and deliver on its growth plans.

Experienced Group of buyers
This group of investors has the unique collective resources necessary to equip Merlin. Blackstone group took Merlin private around 2005 before listing them in 2013. Kirkbi (The Danish Lego Family’s investment arm), is an anchor shareholder who would increase their stake from 30% to 50%.

Heaps of Dry Powder contributed to timing of sale
Private Equity firms will high levels of cash are looking to deploy assets into workable investments. This contributes to the latest in a trend of private equity firms trying to buy back firms they have previously owned, such as in the case of Sweden’s Ahlsell and Germany’s Scout24.
^ https://www.ey.com/en_gl/private-equity/how-high-levels-of-dry-powder-are-driving-private-equity-competition

Depressed Stock Price provides a good timing
“In general, the U.K. stock market continues to be a magnet for takeover activity as weak sterling and fears over the impact of Brexit have depressed equity valuations.” said Russ Mould, investment director at broker AJ Bell.

Expansion plan in China
Lego plans to more than double the number of shops in China this year to 140 in its most rapid expansion in any market. It also plans to have three Legoland in China by 2030.