Leisure group Merlin Entertainments, best known for Legoland Resorts and Madame Tussauds wax museums, is set to be acquired in a £6bn deal by the Danish billionaire family that controls toymaker Lego, private equity group Blackstone and a Canadian pension fund. 

According to multiple people close to the matter, a deal is expected to be announced for the FTSE 100 company as soon as Friday morning. These people cautioned that no deal was guaranteed until the announcement and that the timing may slip. 

One of these people said the deal is likely to value Merlin’s shares at around 460p, a premium of more than 18 per cent to its closing price of 395p on Thursday. At that level, the offer will value Merlin shares at more than £4.7bn. The company has net debt of roughly £1.2bn, giving it an enterprise value of close to £6bn. 

The transaction will see Kirkbi, the investment vehicle of Lego’s founding family, which owns close to 30 per cent of Merlin shares, team up with Blackstone and Canadian pension fund CPPIB. Among its holdings, Kirkbi owns a 75 per cent stake in Lego. 

Merlin, Kirkbi and Blackstone did not immediately respond to a request for comment. CPPIB declined to comment. 

A deal would mark one of the largest European buyouts in recent history and comes at a moment when private equity funds are flush with cash and looking at bigger targets. 

It would also come a month after US activist hedge fund ValueAct said the market was undervaluing the business and that Merlin should seek a buyer to take it private

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In an open letter to the chairman of Merlin, ValueAct said that “private ownership is simply better placed than current public shareholders to underwrite the investments Merlin must make”. The hedge fund owns just over 9 per cent of Merlin’s stock. 

Shares of Merlin, which have climbed by more than a tenth since ValueAct’s public agitation for a sale, remain below an all-time high set in 2017. 

Merlin’s roots date back to 1979 and its opening of a single aquarium in Scotland. The group expanded across the UK and continental Europe before its management group led a buyout of the company in 1999. 

It then changed hands in 2004 and 2005, first to private equity group Hermes and then to Blackstone and Kirkbi. In 2013 it was listed on the London Stock Exchange at 315p per share. A serious accident on a rollercoaster at its Alton Towers attraction in 2015 and the London terror attacks in 2017 both caused sharp drops in the share price. 

The potential transaction comes during a boom time for private equity groups as dealmakers rush to deploy a roughly $2.5tn cash pile. 

New figures from Refinitiv showed the value of leveraged buyouts rose to $256bn during the first half of the year, the second-largest first-half on record. 

The build up of capital has led to private equity groups to be more aggressive in their acquisitions, which in return has pushed prices up on deals and triggered fears of a bubble in the sector. 

Additional reporting by Alice Hancock

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Via Financial Times