Legoland Operator Merlin Entertainments Plans IPO in London; owners are seeking an enterprise value, or the sum of Merlin’s equity and net debt of 1.3 billion pounds, of about 4 billion pounds

Legoland Operator Merlin Entertainments Plans IPO in London

Merlin Entertainments Group Ltd., the private-equity backed owner of Madame Tussauds and the London Eye, plans to raise 200 million pounds ($324 million) selling shares in a London initial public offering. Blackstone Group LP (BX), CVC Capital Partners Ltd. and Lego Group owner Kirkbi A/S are expected to sell part of their stakes in the offering, the company said today in a statement. The owners are seeking an enterprise value, or the sum of Merlin’s equity and net debt, of about 4 billion pounds, according to two people familiar with the matter, who asked not to be identified because the sale has yet to be completed. A London-based company representative declined to comment on the valuation.Merlin comes to the market in a year when IPOs on European exchanges have raised about $17 billion, according to data compiled by Bloomberg, compared with $10 billion in the same period of 2012. Private-equity shareholders including Terra Firma Capital Partners Ltd. and Permira Advisers LLP are selling their stakes in companies via London IPOs as investors return to Europe’s markets on the strength of an economic recovery.

Merlin, which also runs Legoland parks, said it will use proceeds of the IPO to repay debt and cover the expenses.

“The directors of Merlin believe that the global offer will position Merlin for the next stage of its development by providing the appropriate long-term ownership structure,” the company said in the statement. “The global offer will also assist the group in retaining and incentivising employees.”

Net Debt

Merlin, which had net debt of about 1.3 billion pounds at the end of 2012, abandoned a sale to the public three years ago in favor of selling a stake to CVC, and opted against a New York IPO earlier this year, people familiar with the matter said.

Merlin said today that revenue rose 11 percent to 889 million pounds in the 35 weeks ended Aug. 31, or 7.1 percent on a comparable basis. The company is developing a Legoland site in Dubai and has identified potential locations in Japan and South Korea. It also has longer term plans to expand in China.

At least 20 percent of the shares will be publicly traded after the IPO. Kirkbi, which owns 75 percent of the Lego Group, “intends to remain a long-term strategic shareholder.”

Goldman Sachs Group Inc. and Barclays Plc, along with Morgan Stanley, Citigroup Inc., HSBC Holdings Plc and Unicredit Bank AG are managing the Merlin IPO, according to today’s statement. Lazard Ltd. is financial adviser.

To contact the reporter on this story: Ruth David in London at rdavid9@bloomberg.net Clementine Fletcher in London at cfletcher5@bloomberg.net

October 21, 2013 11:13 pm

Merlin’s patience rewarded by IPO signal

By Roger Blitz, Leisure Industries Correspondent

Nick Varney did not sleep on Sunday night. Merlin Entertainments’ chief executive, bruised by one aborted flotation plan three years ago, felt compelled to experience every moment leading up to the theme park operator’s announcement Monday of its proposed initial public offering.

“We’re not all the way there, we’re not stupid enough to think it’s a done deal,” said Mr Varney, as a queue of people waited to board Merlin’s London Eye attraction in Westminster on a cold and wet lunchtime.

But for Mr Varney and Andrew Carr, his loyal finance director of 14 years, publication of its intention to float document has made an IPO far more tangible than in 2010, when market volatility scuppered Merlin’s plans.

It has not gone smoothly. This time around, Merlin’s rollercoaster flotation ride threatened to be derailed by the US government’s shutdown, with the intention to float scheduled for early October.

“Andrew and I have had a few weeks of a heavy sense of déjà vu, which is why we’re looking so happy today,” Mr Varney said.

Mr Carr affected nonchalance. “To be honest when you’ve waited three years, two weeks doesn’t seem very long.”

Mr Varney interjected: “Well, let’s face it – it did.”

Merlin’s long wait has at least enabled it to expand the business, which last year welcomed 54m visitors to its 99 attractions, including Sea Life, Legoland, Madame Tussauds and Alton Towers. The shares are currently held by private equity groups CVC and Blackstone, and Kirkbi, owners of the Lego Group.

Revenues since 2010 are up nearly £300m to £1.07bn, while pre-exceptional earnings before interest, tax, depreciation and amortisation have risen more than a third.

In the 35 weeks to August 31, visitor numbers have increased 10.9 per cent and group revenues on a like-for-like basis are up 7.1 per cent. Future growth, built on the back of more brands and new locations in emerging markets, will last at least another 10 years, Mr Varney believes.

Institutional investors, tapped up three years ago and again in the summer, should be “very familiar with the story”, said Mr Varney. If, as he expects, the private equity groups sell down their stakes within 18 months, Merlin’s ownership structure could be built around Kirkbi as a long-term strategic investor.

Merlin would like to attract a dozen big institutions, with up to 15 per cent of the shareholding in the hands of small shareholders. But the group was coy about whether retail interest generated by Royal Mail’s privatisation had influenced its thinking.

On pricing, Mr Varney said: “We don’t want this to go out below what the company’s worth, any more than we want it to be souped up and in the wrong place to disappoint people.”

He would have no truck with the idea that, after all this wait, the Merlin flotation of a minimum 20 per cent of the shareholding, but probably no more than 23 per cent, was rather limited in terms of size and scope.

“Why would CVC or Blackstone or management or any of us want to sell the minimum if we didn’t believe the shares were going up?” Mr Varney countered.

“If all you were going to do is stoke up demand on 20 per cent in order to then disappoint subsequently, you suffer as much as everybody else.

“We are very set on making sure that this company gets valued at the right level to reward existing shareholders but also to give plenty of upside to new and existing shareholders.”