How are entertainment legacies built? Plastic block by plastic block.
The family behind Lego will join private equity titan Blackstone (+0.25%) and Canadian pension fund CPPIB to buy Merlin Entertainments in a take-private deal valuing the company at $6 billion.
You probably know Merlin pioneered No Shave Dark Ages. But what you may not know is that the company is the world’s second largest attraction operator after Disney.
Merlin runs 120 attractions in 25 countries, including Madame Tussauds wax museums, Legoland theme parks, and the London Eye. Last year, it reported $2.1 billion in revenue.
The deal is one of the biggest acquisitions of a UK-listed business this year. Kirkbi, the investment vehicle of Denmark’s Kirk Kristiansen family and 75% owner of Lego, has had a stake in Merlin since 2005. After the takeover, it will claim 50% of the company, with Blackstone and CPPIB splitting the other half.
Merlin’s shares have faltered in recent months, and private ownership means the company will have more room to invest in its own assets and deliver on growth goals.
The deal is the latest in a string of enormous private equity deals in Europe. So far this year, PE buyouts targeting European companies have totaled $43.4 billion.
The deal slinging at PE firms (even outside Europe) is rooted in their growing reserves of dry powder–aka money they’ve raised but haven’t spent. They’re sitting on an estimated $2.4 trillion right now, as per data provider Preqin.
In the first six months of 2019, the value of leveraged buyouts surged to $256 billion, the second fattest start to the year on record, according to Refinitiv. And PE deals have accounted for 13% of global acquisition activity so far this year, the biggest chunk since 2013.
Lego said Friday the deal would give it greater scope for “significant, long-term investment” as the Danish interlocking plastic-block maker expands in China.
“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 blocks, plans to more than double its number of stores in China this year to 140 in its most rapid expansion move yet.
Merlin has three Madame Tussauds in China and said in January that it was in advanced talks with third parties about a number of sites for Legoland Parks in the country.