Merlin Entertainments, the Legoland operator that the Lego family’s investment company Kirkbi helped take private in 2019, is under growing financial pressure. Losses, falling visitor numbers and a heavy debt load have forced it into an expensive refinancing, according to a report by The Telegraph.
Merlin, headquartered in London, runs Sea Life, the Legoland resorts, Madame Tussauds and Peppa Pig World of Play, as well as the London Dungeon, Alton Towers, Thorpe Park and the London Eye. It became the world’s second-largest visitor attraction operator after Disney. In 2019 Blackstone took it off the stock market with Kirkbi and the Canada Pension Plan Investment Board as partners, paying £4.7bn, about 12 times annual earnings. The deal relied heavily on debt and closed just before the Covid-19 pandemic.
The numbers have moved sharply since. In 2018 Merlin made a pre-tax profit of £285m on revenue of £1.68bn, with about 67 million visitors. Net debt rose from £1.1bn that year to £4.7bn by the end of 2020, and net financing costs have climbed almost tenfold, from £38m in 2018 to £368m last year. Merlin reported a pre-tax loss of £426m last year, visitors fell to 60.5 million, and it wrote down Madame Tussauds by £262m. More than £600m of debt falls due in 2027. Merlin has agreed a £657m loan, secured against the London Eye, the London Dungeon and Shrek’s Adventure London, to refinance about £630m due next year. Some older bonds now trade at around 65 cents on the euro, with yields of roughly 21 per cent against about 7 per cent at issue.
Helen Rodriguez, an analyst at CreditSights, said management has spread investment across too many sites. “The investment strategy hasn’t been terribly effective,” she said, adding that Merlin tried to sell Sea Life without attractive offers. Fiona Eastwood, who joined last year from the BBC’s commercial arm, has introduced a turnaround plan. Merlin handed Blackpool Tower back to the council in June, spent £70m on indoor roller coasters at Legoland parks in Florida and California, and in February sold its Lego Discovery Centres to the Lego Group for more than £200m.
A Merlin spokesman said the company is making progress with its transformation, investing in its strongest sites and drawing more guests, and is committed to refinancing its 2027 bonds in good time. Rodriguez said the refinancing buys a couple of years. For Kirkbi and its partners, those years will decide whether the attractions regain their appeal or whether the debt problem has only been pushed back.
