UPDATE 1-Merlin to price London float in top half of range -sources

Wed Nov 6, 2013 7:47am EST

By Kylie MacLellan

LONDON Nov 6 (Reuters) - Madame Tussauds owner Merlin Entertainments is expected to price a planned stock market listing in London in the upper half of its original range following strong investor demand, sources close to the deal said on Wednesday.

Private equity-backed Merlin operates the global waxworks museum franchise and dozens of other attractions in 22 countries.

Two sources said it now plans to sell at least 25 percent of the the company in the offering, which will value Merlin at as much as 3.3 billion pounds ($5.3 billion). It initially said it would float a minimum of 20 percent.

Shares in the world's second-largest visitor attraction operator behind Walt Disney Co are being offered at between 305 pence and 330p each, the sources said, compared to an original range of 280p to 330p.

Order books on the sale are heavily oversubscribed, one of the sources added.

A spokesman for the company declined to comment.

Merlin, which on Monday said it would be closing the offer early, received enough orders for all the shares within a day of the sale launching, the sources said.

On Tuesday, analysts at Numis, which is not involved in the offering, said in a note they estimated Merlin was worth 360p per share and recommended investors put in orders at the top end of the range.

"Merlin's entrenched market position, strong track record of organic growth and value creation, and attractive expansion opportunities in a growing market are all important drivers of the valuation," the note said.

At 305p per share, the mid-point of Merlin's original range, Numis said the company would be valued at an estimated full-year 2014 EV/EBITDA multiple of 9.8 times.

That puts it at a discount to the average of UK leisure and consumer companies such as hotel and coffee shop operator Whitbread which have estimated 2014 EV/EBITDA of 12.1 times, and US theme parks such as Disney and SeaWorld which have an average forward EV/EBITDA ratio of 10.3 times.

Part of the listing for Merlin, whose brands also include the Legoland theme parks and the London Eye Ferris wheel, will consist of new shares, which it expects to raise 200 million pounds to reduce debt.

Its owners, private equity firms Blackstone Group and CVC, company directors and employees and the Danish investment firm Kirkbi A/S which controls Lego Group, are also selling some of their holdings.

Merlin is due to make its stock market debut on Nov. 8.

Goldman Sachs and Barclays are running the sale and are joint bookrunners along with Citi and Morgan Stanley.