LONDON/COPENHAGEN (Reuters) - Lego's founding family and private equity firm Blackstone BX.N are taking Britain's Merlin MERL.L private again in an agreed deal valuing the Madame Tussauds and Legoland owner at $7.5 billion.
The world's second-largest operator of visitor attractions after Disney DIS.N said on Friday the deal would give it greater scope for "significant, long-term investment" as the Danish interlocking plastic-brick maker expands in China.
The buyers said that taking it off the stock market, one of the biggest European private equity deals in recent years, would allow the company to invest more in its assets and deliver on growth plans.
“We believe that this group of investors has the unique collective resources necessary to equip Merlin... for their next phase of growth,” said Soren Thorup Sorensen, chief executive of Kirkbi, the private investment company of Lego’s Kirk Kristiansen family which already holds a 30% Merlin stake.
Lego, known around the world for its colorful plastic bricks, plans to more than double the number of shops in China this year to 140 in its most rapid expansion in any market.
Merlin has three Madame Tussauds in China and said in January it was in advanced talks with third parties about a number of sites for Legoland Parks in the country.
Through efforts to combine its bricks with the digital world, Lego is trying to stabilize its business after sales dropped in 2017 for the first time in a decade.
Blackstone bought Merlin from Hermes Private Equity for 102 million pounds in 2005 and then Merlin then bought control of Legoland. As part of the deal, Kirkbi took a stake in Merlin too.
During 8 years of joint control of the company, Merlin more than tripled its number of attractions to 99 and multiplied its annual visitor numbers ninefold to 54 million, helped by large acquisitions including the Tussauds Group.
At the $5.6 bln IPO in 2013, Blackstone’s resulting equity stake was worth over $1 billion.
Shares in Merlin, which also operates The London Eye, rose more than 50% after its London listing to a peak in June 2017. But just seven months later had fallen below the IPO price.
They were hit by a rollercoaster accident at Alton Towers in 2015 and the 2017 London terror attacks.
Merlin shares, which closed at 395 pence on Thursday, rose 14% on news of the recommended deal, which values them at 455 pence each, giving the company an enterprise value, including debt, of 5.91 billion pounds ($7.5 billion).
Kirkbi will own 50% of Merlin after the agreed takeover, which is expected to be completed in the fourth quarter, with Blackstone and Canadian pension fund CPPIB owning the rest.
The deal also represents 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.
Merlin said that the deal was good for shareholders and urged them to accept it.
“The Merlin independent directors believe this offer represents an opportunity for Merlin shareholders to realize value for their investment in cash at an attractive valuation,” Merlin Chairman John Sunderland said in a statement.
Activist investor ValueAct Capital last month called on Merlin to take itself private given the level of investment needed in the company.
The consortium of buyers said on Friday it recognized “significant, long-term investment is required”, a process that will be easier when Merlin is no longer listed.
A source familiar with the matter said an initial, unsolicited offer from the consortium had valued the firm at 425 pence and talks about a takeover pre-dated the ValueAct letter.
Last year, it had 67 million visitors at its 120 attractions across 25 countries.
Additional eporting by Bhargav Acharya in Bengaluru and Josephine Mason and Georgina Prodhan in London; Editing by Bill Rigby/Edmund Blair/ Alexander Smith/Jane Merriman
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