Blackstone Goes To The Amusement Park –

The Blackstone Group has completed its acquisition of Legoland, an operator of four amusement parks, for $459 million (o375 million), tapping its $6.5 billion Blackstone Capital Partners IV for the transaction. The structure behind the financing has Blackstone putting in 40% equity and leverage to 5.3x total net EBITDA. Blackstone also announced it would merge the four newly acquired parks with Merlin Entertainment, an amusement park operator it purchased in May from Hermes Private Equity for $180 million (GBP102.5 million).

Together, the combined entity, Merlin Entertainment Group, will be the second biggest such business in Europe, behind Tussauds Group, attracting 12 million visitors per year and boasting combined EBITDA of nearly $70 million on sales of $235 million for 2004. Of those figures Legoland contributed $43.5 million to EBITDA and approximately 5.6 million visitors. Blackstone will own 70% of the combined company. The LEGO Company and their controlling family shareholders netted out the remaining 30%, not just of Legoland but of the combined entity. This would essentially value the entire company at more than $900 million or 13x 2004 EBITDA.

When compared to last year’s Six Flags Europe deal, the price may seem lofty. Palamon Capital Partners bought seven parks from the company for $186 million, (s155 million) which brought in $31 million (s26 million) in EBITDA on revenue of $144 million (s120 Million) and 5.5 million visitors a year. Debt on that deal totaled $129 million (s107.5 million) with leverage on senior debt accounting for 80% of the total.

Joseph Baratta, a senior managing director at Blackstone, said, “We believe that Merlin, led by Nick Varney and his team, is an ideal platform from which to build a terrific business of scale in this sector.”

Another source with the firm echoed his view, saying “Merlin has fantastic management, and everyone acknowledges that LEGO management [was lacking]. These are people who are devoted to LEGO, but they’re family at the end of the day, not business people and it was not being managed effectively. What we get is to bring in top quality management that already understands the business of theme parks inside and out.” When asked about future growth plans, like adding hotels, etc. the source replied, “While nothing is definitely set, those are expansion paths we’re looking at, a Disney route or a Universal Orlando route of which we still own 50 percent.”

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