Lego sells theme parks to Blackstone

COPENHAGEN - The world's fourth-biggest toymaker, Denmark's Lego, has sold its Legoland theme parks to private-equity firm Blackstone for 375 million euros ($687 million) and a 30-per cent share in a new entertainment group.

Lego said on Wednesday it and Blackstone had formed Europe's second-largest amusement group to own and manage the four Legoland sites and Blackstone's Merlin Entertainments attractions.

Family-owned Lego, which has retreated to its core business of colourful plastic building blocks and toys since making the worst loss in its over 70-year history in 2003, said New York-based Blackstone will buy its parks and will take 70 per cent of the shares in the new joint group. The remaining 30 per cent will be held by Lego.

The Danish firm said it had sold the parks, which make a modest profit, to free up cash and reduce debt in order to bolster the core toy business.

Lego is struggling to return to profit amid cut-throat competition in toys. Last year, net losses more than doubled to a record 1.9 billion crowns ($467 million), after large write-down charges.

Blackstone agreed in May to buy Merlin, which operates European attractions such as aquarium brand Sea Life, catacomb experience The Dungeons, and Earth Explorer, which offers children an understanding of earthquakes and volcanic eruptions.

PricewaterhouseCoopers estimates worldwide spending on theme and amusement parks will grow 4.5 per cent a year to US$26.8 billion ($40 billion) by 2009, driven by economic growth and weakness in the dollar. In Europe and the Middle East, theme-park spending is expected to grow 5 per cent annually to reach US$5 billion in 2009.

Blackstone and Lego said the blend of parks and attractions in the new group would make it less vulnerable to factors such as weather, fashion and the local economy.

Lego chief executive Jorgen Vig Knudstorp said the partnership would create a natural "weather hedge" with the mainly outdoor Legolands complementing Merlin's indoor parks.

"Through the years I've listened to our park managers' excuses about the weather and now there won't be any more because we'll have plenty of indoor activities through Merlin."

The Legoland parks are in Denmark, Britain, the United States and Germany, while Merlin has 28 attractions in eight countries in Europe.

Knudstorp expects the value of Lego's investment in Merlin to grow in coming years and said that the increased exposure of the Lego brand through Merlin's parks would sell more toys.

Legoland said with 12 million visitors annually, the new group will be the Europe's second-largest such business after Britain's Tussauds Group and the ninth-largest in the world.

The head of the new company will be the present chief executive of Merlin Entertainments, Nick Varney.

"We see the new partnership as an excellent platform from which to realise the growth potential of both businesses, not just in Europe, but worldwide," Varney said.

Legoland had 2004 revenues of 172.2 million euros and a core profit of 36.3 million euros while Merlin had revenues of 44.9 million pounds ($119.29 million) and a core profit of 14.5 million pounds.

Lego was advised by US investment bank Morgan Stanley.

- REUTERS