While Denmark-based Lego has said it expects this summer to sell off its four theme parks , including Legoland California in Carlsbad , to raise capital for its flagging toy division, a U.S.-based investment firm appears to have become a front-runner in the bidding by first acquiring a leading European attractions operator.
The investment firm, Blackstone Group International Ltd., which is based in New York, announced the purchase of Merlin Entertainment on May 23 via its Blackstone Capital Partners IV for $189 million.
The seller was U.K.-based Hermes Private Equity.
Officials of the Danish toymaker and Legoland California had little to say.
“All we can say is we expect the sale to take place sometime this summer,” said Charlotte Simonsen, director of corporate communications at the company’s headquarters in Billund, Denmark.
Merlin Entertainment operates 28 visitor attractions, including the Dungeons, Sea Life and Earth Explorer brands in eight European countries. Altogether they drew more than six million visitors in the company’s fiscal year ended in February.
Joseph Baratta, a senior managing director of the Blackstone Group, said, “We believe that the European attractions and theme-park sector will enter into a period of consolidation in the medium term and that Merlin is an excellent base from which to pursue follow-on acquisition opportunities.”
Getting Serious
According to Amusement Business Magazine, the move to acquire Merlin Entertainment “signaled the seriousness of its (the Blackstone Group) quest to buy the Legoland parks.” Meanwhile, the London Times reported on May 24 that analysts believe Blackstone and Dubai International Capital of Dubai, one of the United Arab Emirates, are front-runners in the bidding for the four theme parks.
Aside from Carlsbad, Lego has theme parks in Windsor, England, Guenzburg, Germany, and Billund.
According to Cami Mattson, the president and chief executive officer of the San Diego North Convention & Visitors Bureau, news of the pending sale means the public can expect that it will “continue to improve and continue meeting the needs of the customer.”
“Legoland California is diversifying and it is growing and is getting repeat business, which is important,” Mattson said.
Ted Owen, the president and chief executive officer of the Carlsbad Chamber of Commerce, said he expects that a new owner will make upgrades “based on their marketing skills.”
He doesn’t expect Legoland California will be transformed into another type of theme park. He also said he has heard that the family that owns Lego and the four theme parks is seeking a 75 percent investor and wants to retain a 25 percent interest in the parks.
Among firms reported to be competing against Blackstone and Dubai International Capital are two London-based equity partners, Palamon Capital Partners and Apollo Management.
Six-year-old Legoland California, which sits on 128 acres in Carlsbad, had a 9.3 percent increase in attendance to 1.42 million in 2004 compared with the year before, said John Jakobsen, its president and general manager.
Throughout the U.S. amusement park industry, the average rate of attendance growth during 2004 was 4 percent, according to Amusement Business.
Jakobsen said Legoland California drew about 50,000 more guests its first two years in operation than it did in 2004. But attendance subsequently fell in the economic downturn that came in the wake of the terrorist attacks of Sept. 11, 2001.
Privately held Legoland doesn’t provide its revenue figures, however Jakobsen said that the total for the Carlsbad park increased 11 percent in 2004 compared with 2003.
New Exhibits
Aside from investing $5 million to open five new exhibits and rides in 2004, the Danish toymaker spent nearly $6 million to open a robotic roller coaster, Knights’ Tournament, last week and will open an 18-hole miniature golf course in June.
Until this year, the $5 million marked the most that Lego had spent on capital improvements since Legoland California opened in 1999.
The new roller coaster has five “intensity settings,” Jakobsen said, and was designed to appeal to an older crowd of children, ages 12 and up, than the park targeted initially. But since the ride is adjustable, younger children will also enjoy it, he added.
While Jakobsen would not discuss the theme park’s pending sale, he did say that the news has not kept people away.
“It’s a business story and although some people have asked questions, the vast majority don’t know about it,” he said.
Heavy rains during the winter and early spring were a factor that hurt Legoland California’s attendance, but Jakobsen said he expects the park’s gate count will pick up this summer and that the total for 2005 will at least equal the year before.
