Theme Park operator Merlin Entertainments (MERL) has succumbed to pressure from activist shareholder ValueAct and accepted a 455p cash offer from a consortium.
Berkeley is 50% owned by private equity house Blackstone and the Canadian Pension fund CPPIB. The other half, interestingly, is in the hands of the Kirk Kristiansen family that founded and still owns Lego.
Merlin’s shares have rallied 14% to 450p, just shy of the offer price.
The acquisition values Merlin at £4.76bn on a fully diluted basis and including debt, or an enterprise value to earnings before interest, depreciation and amortisation (EBITDA) of 12.
READ MORE ABOUT MERLIN HERE
Merlin’s directors, advised by Goldman Sachs International, Barclays and Citi, are recommending that shareholders accept the offer as they see it as fair and reasonable. ValueAct is also tendering its full 9.3% stake.
The deal is being financed by a combination of equity and short term debt facilities. The acquisition is expected to close in the fourth quarter of 2019.
WHY SELL?
The consortium believes that in order to drive future growth and fully exploit the value of the assets and brands, Merlin and all its stakeholders are better served by private equity ownership.
Chairman Sir John Sutherland said’ the company has generated meaningful value since IPO, with significant growth in revenue, earnings and cash flow.
‘Following an unsolicited approach by a Consortium of investors, and after rejecting a number of their proposals, the Merlin Independent Directors believe this offer represents an opportunity for Merlin Shareholders to realise value for their investment in cash at an attractive valuation. We are therefore unanimously recommending it to our shareholders.’
The implication is that institutional shareholders do not have the stomach or patience to support Merlin’s long term investment plans. It remains to be seen whether any of the institutions that own shares put up a fight to keep Merlin public.
