Nabil N. El-Hage, Brenda Chia
Harvard Business School (210014-PDF-ENG)
July 24, 2009
Blackstone Group had developed the theme parks and attractions business in Europe. He thought about how he could generate liquidity for his investors. Blackstone entered the theme parks and attractions business in Europe in 2005 by acquiring a majority stake in UK-based Merlin Entertainment. In 2005 and 2006 Merlin Entertainment acquired two other similar companies, Denmark-based LEGOLAND and Italy-based Gardaland. In late 2006, the Blackstone team looked for ways to generate liquidity for its investors. The options were to carry out a dividend recapitalization of Merlin Entertainment or to acquire Tussauds Group. If successful, the acquisition would lead to the world’s second-largest theme park and attraction business after Disney. Tussauds Group was owned by another private equity firm, Dubai International Capital (DIC). Blackstone’s objective was to increase at least three times its original investment in Merlin by recapitalizing dividends and at least five times its original investment in Merlin through the acquisition of Tussauds. A third option emerged while Blackstone was negotiating with DIC. This was the opportunity to sell-lease the underlying properties owned by Merlin and Tussauds. Based on the facts and financial data provided, it is clear that there have been trade-offs between the potential performance level of each option, the timing, and the risks to be managed. What should the Blackstone team do?
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