Merlin Casts A Spell

Merlin taken private

Image source: SHTRAUS DMYTRO, shimonfoto - Shutterstock Andrew Martin - Pixabay

What's going on?

A group of investors including the founding family of toy (slash film) maker Lego and private equity heavyweight Blackstone pulled the sword from the stone on Friday, announcing the $8 billion purchase of Merlin Entertainments. It’s one of the biggest European takeovers in years.

What does this mean?

Merlin owns and operates 120 enchanting theme parks and attractions around the world, including the blockbuster Legolands – which helps explain the Lego dynasty’s existing 30% stake in the British-headquartered firm. Blackstone knows Merlin well, too – it was its majority owner before the company’s 2013 initial public offering. Sitting on an enormous pile of unspent cash may have encouraged Blackstone to court Arthurian romance once again.

Merlin’s recent investor updates have bemoaned the effects of Brexit as well as weaker tourism amid a global economic slowdown. And customers who did experience its charms have complained of high prices. In taking Merlin private, investors who know the company well may be able to help it rediscover the magic without pressure from the hoi polloi.

Why should I care?

For markets: Activist hocus-pocus. 

Merlin’s stock poofed up 14% on Friday, valuing it around the agreed purchase price. One firm proponent of such stock market wizardry is Merlin’s resident activist investor, a curious sprite which previously used the influence afforded by its large stake in the company to argue that other investors were undervaluing it – and push for just such a private sale. Merlin’s buyers, however, claim the activist’s occult influence had no effect on their decision…

The bigger picture: Who’d want to be public anyway?

Two stock market debutants, Volkswagen truck business Traton and Airtel Africa – the continent’s second-largest mobile operator – joined the madding crowd’s ignoble strife on Friday. Investors didn’t give them the warm welcome they’d have hoped for: tepid traction for Traton saw its stock fall 2%, while Airtel received a decidedly cold shoulder – dropping 13%.

Originally posted as part of the Finimize daily email.

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