Merlin Entertainment takeover by Lego

Exciting news in that one of my investments, Merlin Entertainment is going to be taken private by Lego. They will pay 4.55 per share, valuing the company at £4.8bn, a c.15% premium on the price they have been trading at this week. BBC Link.

The entertainment provider is the second largest theme park operator in the world after Disney, and owns a number of theme parks and tourist attractions in UK & Europe with new openings in US and Asia. Performance has been steady recently, but it was not really a growth or dividend stock, with low growth and a dividend yield of only 1.78%. Growth has mainly come from the new attractions in such as Legoland & Peppa Pig, with the UK market being stagnant.

Lego have been a long term shareholder in Merlin, previously owning 30%. It makes sense for Merlin to be under private ownership as this will enable them to invest for the long term without the market looking over them and scrutinising every investment update. Its also a good acquisition for Lego and diversifies there business, whilst also opening a number of synergies.

Investment performance
This outcome is good for me as I will make a profit of c.17% on my shareholding, or c.19% in total if you include the dividend income over the last 2 years.

I first purchased shares in June 2017, and have been investing at rate of 100 per month every since. I currently hold 635 shares, which cost an average of 3.86.My most expensive purchases were in June 2017 for 4.99 a share, with the cheapest being 3.21 in January 2019. I have also received dividend income of 56.

A look at the investment underlines my decision to adopt a dollar cost averaging strategy. If I had invested all at once at the beginning, I would be sitting on a loss of 9% rather than a profit. Whilst 17% over 2 years is not spectacular, it is a solid performance and pleasing for me as it exceeds my target of 8%.

I am a little sad as it was a company I really liked, always thought it had great potential and had visited a number of the attractions over the years, as recently as last week. It will also leave a small hole in my portfolio. Although I am not great at stock picking, I like to pick a new equity every year and drip feed funds in. Merlin was my 2017 pick and comprised 2.5% of my portfolio. However it did get very close to my 20% stop loss limit in 2017.

Good luck Lego!

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