Thursday, February 11, 2010

Markets force Merlin to postpone £2bn flotation

By Helia Ebrahimi

The London Eye, on the bank of the River Thames, is one of the assets owned by Merlin
The London Eye, on the bank of the River Thames, is one of the assets owned by Merlin

The theme park operator, which is backed by private equity firm Blackstone Group and Dubai International Capital, was due to press the go button on a formal stock market process next week.

However, Blackstone’s decision to pull the listing of airline and hotels business Travelport last night after institutional investors failed to support it at the required price has meant Merlin’s IPO is no longer viable. A source close to Merlin added that the company was still evaluating all its options.

Merlin’s strong 8pc annual growth and its £230m of earnings before interest, tax, depreciation and amortisation (Ebitda) made it a rare jewel in the crown amongst a long pipeline of private equity IPOs.

Its decision not to seek a market listing despite performing strongly in the face of the recession underlines a growing crisis in the IPO market where a long pipeline of private-equity owned businesses have been clamouring for a financial exit.

Retailer New Look – owned by Permira and Apax – has already filled its intention to float and sent out research to perspective investors but is now considering whether to progress with its plans.

At a crisis meeting held by the company’s board yesterday the company decided not to pull plans and to continue to try to make the flotation work.

However, insiders say that it will become increasingly difficult to press forward given the market’s loss of appetite for new listings.

In the end, Travelport was derailed not only by market fluctuations that stemmed from sovereign default fears, but also from company specific issues. These were a mixture of the company’s heavy debt levels and the emergence of a controversial incentive plan for the company’s executives.

Travelport’s larger rival Amadeus is also believed to be reviewing its plans to raise €3bn on the Spanish stock exchange in a listing that could value the group at €8bn.

The company, owned by Cinven and BC Partners, had been on course for a flotation in the first half of this year and was seen as a comparable business to Travelport.

Earlier this week BC Partners successfully floated its French healthcare business Medica in Paris. Despite the float price being lowered before the IPO, the shares have since risen about 10pc.

Fund managers, which have been very cautious about debuts by private-equity backed companies, say that not enough equity is left on the table when the debt levels are brought down to fit with the stock market.

“We have pumped £80bn into the stock markets already – but these were for companies where we already owned equity,” said Andy Brough, a fund manager at Schroders.

“In these private equity floatations, where is the upside for investors if all we are doing is re-financing the companies where the PIK notes are eating up everything in sight?”

With a debt to Ebitda ratio of five times, Merlin is among the most under-geared companies in the leisure sector.

Sources say there is no immediate need to refinance the business, which gives its backers the option of taking their time in looking for the deal that gives the group the best long term returns.

Blackstone bought Merlin in 2005 for £102.5m in the buy-out house's smallest financial investment. It backed chief executive Nick Varney’s ambitious plans to consolidate the theme park sector and within three years it had added the £1bn Tussauds Group, Legoland and Italian theme park Gardaland to its London Dungeons and Sea Life portfolio.

In the process it grew the £7m of ebitda to £230m, giving the group eight years of double digit growth.

Earlier this year the group paid $22.3m (£13.8m) for Cypress Gardens, a US theme park close to Orlando, where it is looking to invest more than $100m to convert it into the the world’s biggest Legoland.

Visitors to attractions Merlin has owned for more than a year rose 17pc in 2008 to 38 million, just as the industry worldwide saw attendance fall by 0.4pc.

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Tycoon trades high life for bedsit


Giving it all away ... Karl Rabeder.

Giving it all away ... Karl Rabeder.

PARIS: An Austrian tycoon is giving away every penny of his £3 million ($5.3 million) fortune, having realised that his riches made him unhappy.

Karl Rabeder, 47, a businessman from Telfs, near Innsbruck, is selling his villa with lake, sauna and spectacular mountain views over the Alps, valued at £1.4 million.

Also for sale is his old stone farmhouse in Provence, on the market for £613,000. Already gone is his collection of six gliders valued at £350,000.

Mr Rabeder has also sold the interior furnishings and accessories business - from vases to artificial flowers - that made his fortune.

''My idea is to have nothing left. Absolutely nothing. Money is counter-productive - it prevents happiness.''

He will move out of his Alpine retreat into a small wooden hut in the mountains or a simple bedsit in Innsbruck, surviving on £800 a month while the proceeds go to a charity he set up in Latin America. He will draw no salary from it.

''For a long time I believed that more wealth and luxury automatically meant more happiness. I come from a very poor family where the rules were to work more to achieve more material things, and I applied this for many years.''

But over time a conflicting feeling developed. ''More and more I heard the words: 'Stop what you are doing now - all this luxury and consumerism - and start your real life'. I had the feeling I was working as a slave for things that I did not wish for or need.''

For many years, he said, he was not brave enough to give up his comforts. The tipping point came during a three-week holiday with his wife in Hawaii.

''It was the biggest shock in my life when I realised how horrible, soulless and without feeling the five-star lifestyle is.

''In those three weeks we spent all the money you could possibly spend. But in all that time we had the feeling we hadn't met a single real person - that we were all just actors. The staff played the role of being friendly and the guests played the role of being important, and nobody was real.''

Mr Rabeder decided to raffle his Alpine home, selling 21,999 tickets at £87 each. The Provence house, in the village of Cruis, is on sale at the local estate agent.

All the money will go into his microcredit charity, which offers small loans and advice to self-employed people in El Salvador, Honduras, Bolivia, Peru, Argentina and Chile.

Since deciding to sell up, Mr Rabeder said he had felt ''free, the opposite of heavy''. But he did not judge those who chose to keep their wealth. ''I do not have the right to give any other person advice. I was just listening to the voice of my heart and soul.''

Telegraph, London

European Swift bank data ban angers US

Berlin cashpoint
Tracking funding has been a priority for the US since 9/11

The European Parliament has blocked a key agreement that allows the United States to monitor Europeans' bank transactions - angering Washington.

The US called the decision a "setback for EU-US counter-terror co-operation".

The vote was a rebuff to intensive US lobbying for EU help in counter-terrorism investigations.

EU governments had negotiated a nine-month deal which would have allowed the US to continue accessing the Swift money transfer system.

Top US officials - including Vice-President Joe Biden, Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy Geithner - had contacted MEPs in recent days to urge them to consider "the importance of this agreement to our mutual security", the Associated Press news agency reported.

But Euro MPs said the deal provided insufficient privacy safeguards.

Lawmakers in Strasbourg voted 378-196 against the deal, with 31 abstentions.

Secret access

The US started accessing Swift data after the 11 September 2001 terror attacks on New York and Washington.

But the fact that the US was secretly accessing such data did not come to light until 2006.

Last week the Greens' home affairs expert, Jan Philipp Albrecht MEP, said that in backing the new deal the European Commission and EU governments had "not respected the fundamental criticism about the lack of sufficient protections with regard to privacy and the rule of law".

The leader of the Socialist group, Martin Schulz MEP, said: "We want a new and better deal with proper safeguards for people's privacy."

Tracking the funding of terror groups globally has been a priority for Washington since the 2001 attacks.

Swift handles millions of transactions daily between banks and other financial institutions worldwide. It holds the data of some 8,000 banks and operates in 200 countries.

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