London Eye owner Merlin’s float has magic touch

The London Eye is among the attractions which made Merlin irresistible to investors. Picture: Getty

In one of the most successful London floats of recent times, investors ploughed in at the 315p offer price, which was in the upper half of the original range, with the stock hitting a high of 355p before closing at 347p.

The private equity owners of Merlin, which also owns the Edinburgh Dungeon, floated 30 per cent of the group, raising £957 million of new money.

The world’s second largest visitor attractions operator after Walt Disney had originally set a range of 280p to 330p per share.

Merlin’s 50-year-old chief executive Nick Varney, who owned 1 per cent of the company before the flotation, stands to bank just under £10m from selling almost a third of his stake.

The company, which closed the offering early due to strong demand, said 87.5 per cent of the sale had gone to institutional investors such as pension funds, with individual members of the public getting the remainder.

A source familiar with the matter said the float was nine times oversubscribed at the offer price. Individuals who applied for the minimum £1,000 of stock received 317 shares each.

Those applying for larger amounts were allocated the 317 shares plus 55 per cent of the rest of their order up to a maximum of 8,872 shares.

One City leisure analyst said: “The Royal Mail flotation was a success but was widely viewed as under-priced by the government. Merlin certainly wasn’t under-priced. Its success suggests the market thinks big theme parks and leisure attractions are a strong defensive business, resistant if not quite immune to cyclical economic downturns. They also have a sizeable younger customer demographic, with parents always less likely to cut back on treats for children.”

Lots of institutional investors who put in orders received nothing, another source close to the deal said. The net proceeds for the company totalled £165m and will go towards reducing debt.

Merlin operates 99 attractions in 22 countries and drew 54 million visitors last year.

The business is the latest high-profile firm to list on the London market, following recent debuts by Royal Mail and estate agency chain Foxtons. Merlin had revenues of more than £1bn last year.

Formed in 1999, Merlin made a previous bid to float in 2010 but was thwarted by volatile market conditions.

Shareholders will be entitled to a 30 per cent discount on either two adult Merlin annual passes or one family Merlin annual pass.

Private equity owners Blackstone and CVC sold a chunk of their shares, as well as Kirkbi, the Danish family-owned investment company that owns the Lego and Legoland trademarks and 75 per cent of the Lego Group.

Kirkbi has retained a stake of just under 30 per cent, while Blackstone held 22.6 per cent and CVC owned 13.1 per cent at the start of trading today.