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Merlin Entertainments board of directors recommends joint buyout bid by Blackstone and parent of LEGO Group valued at $6 billion

June 28, 2018 — KIRKBI Group, which currently owns 75% of LEGO Group and 29.58% of Merlin Entertainments, in conjunction with former Merlin co-owner Blackstone Group and the Canada Pension Plan Investment Board (CPPIB) has offered a cash buyout of Merlin Entertainments valuing the company at approximately £4.766 billion or US$6 billion. The Merlin Board is recommending the offer, with KIRKBI and Blackstone acting as equity partners and CPPIB as co-investor.

KIRKBI has maintained a significant strategic shareholding in Merlin since the sale of LEGOLAND® Parks to Merlin in 2005. KIRKBI and Blackstone jointly controlled Merlin in the 8 years prior to the 2013 public listing, during which time Merlin became the second largest location based entertainment business globally.

Commenting on the Acquisition, Sir John Sunderland, Chairman of Merlin, said: “Merlin is a global leader in location based, family entertainment, with a unique portfolio of brands and attractions spanning 25 countries and four continents, and with a proven strategy that has delivered over many years. The company has generated meaningful value since IPO, with significant growth in revenue, earnings and cash flow. Following an unsolicited approach by a Consortium of investors, and after rejecting a number of their proposals, the Merlin Independent Directors believe this offer represents an opportunity for Merlin Shareholders to realise value for their investment in cash at an attractive valuation. We are therefore unanimously recommending it to our shareholders.”

Søren Thorup Sørensen, Chief Executive Officer of KIRKBI A/S, said: “As the long-term owner of the LEGO® brand and as a strategic shareholder in Merlin since 2005, we have great pride and passion for this amazing company, its management team and its employees. With a shared understanding of the business and its culture, we believe that this group of investors has the unique collective resources necessary to equip Merlin, including the LEGOLAND® Parks and LEGOLAND® Discovery Centres, for their next phase of growth. We are committed to ensuring LEGOLAND® and the other activities in Merlin reach their full potential, which we believe is best pursued under private ownership, in order to deliver fantastic experiences to visitors of all ages around the world.”

Joe Baratta, Global Head of Private Equity at Blackstone, commented: “We are pleased to partner with KIRKBI and CPPIB to acquire a business we know very well. We are prepared to commit the substantial resources required to support the long-term objectives of Merlin, which will require significant investment to ensure its long-term success. We believe we are uniquely placed with our long-dated investment fund, Core Private Equity, to make this investment alongside our partners at KIRKBI and CPPIB. We look forward to backing Nick Varney and his strong management team in driving Merlin into the future.”

Commenting on the Acquisition, Ryan Selwood, Managing Director, Head of Direct Private Equity at CPPIB, stated: “Merlin has established itself as a globally diversified, world-class operator of themed attractions and entertainment. Its ability to partner with a number of leading global brands to deliver high-quality family entertainment has been key to Merlin’s success. Through close collaboration with our partners, we look forward to promoting the steady growth, long-term capitalisation and continued international expansion of this business, which aligns well with CPPIB’s long-horizon investment strategy.”

Pursuant to its current licensing agreement with LEGO Group, Merlin has been granted a perpetual, exclusive, worldwide license to use the LEGOLAND® wordmark and trademarks for the purpose of amusement parks, accommodation and “Mid-Size” attractions. The LEGOLAND® branded attractions currently consist of eight LEGOLAND® Parks and twenty-three LEGOLAND® Discovery Centres, with further attractions in the pipeline.

The LEGOLAND® brand represents a strong asset in the Merlin portfolio of brands and the parks and Discovery Centres serve as important touchpoints in the Merlin portfolio of attractions. Blackstone and KIRKBI have developed an investment plan for these attractions and believe certain amendments to the LCA will be necessary in order to ensure its successful implementation. These changes will be accompanied by the implementation of proposals to increase and strengthen strategic collaboration and alignment between LEGO A/S and Merlin through, for example, collaboration on product, brand and IP development. The detail of these amendments remains to be finalized following the acquisition becoming effective and consultation with Merlin management.

Such amendments are expected to include an increase in the level of capex on LEGOLAND® Parks, changes to the licensing arrangements for LEGOLAND® Discovery Centres, more flexibility for the LEGO Group to operate education centres and events near the LEGOLAND® Parks and an updating of the LEGO product supply arrangements.

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