Rollercoaster ride puts Merlin under pressure
MERLIN Entertainments, the owner of Legoland and Madame Tussauds, has been urged by one of its largest investors to take its shares off the stock market and move to private ownership.
Hedge fund Value Act, run by Jeffrey Ubben, wrote to Merlin’s chairman Sir John Sunderland claiming the market is undervaluing his business.
San Francisco-based Value Act said Merlin would be better off being bought out by a private equity firm or similar bidder. It believes there is significant interest from such potential buyers.
Value Act’s chief investment officer Mason Morfit said: ‘Simply put, Merlin has struggled as a public company.’
Morfit said Merlin has been right to invest in its business, but tragedies such as UK terror attacks and rollercoaster accidents have pushed down its shares and investor returns.
While returns keep sliding, he added, it will become harder for Merlin to keep spending money on its long-term future. The open letter from Value Act, which owns 9.3pc of Merlin worth around £334m, was notable as the activist investor generally prefers to keep its conversations with portfolio companies private.
Merlin hit back and said it is in the best interests of shareholders to continue as a public company.
Still, investors seemed hopeful someone might swoop in with a reasonable offer. Shares climbed 7.5pc, or 25.1p, to 357.6p.
Investment platform AJ Bell released a strong set of half-year results, its first as a listed company. Revenue hit £50.1m in the six months to March 31, up 17pc on a year earlier, while profit soared 27pc to £17.7m. AJ Bell – which allows investors to put money in stocks and funds through its online platform – pulled in 16,941 customers over the period, taking its total to 214,853.
Andy Bell, chief executive and founder, said that floating on the stock market last December was less about raising extra money and more about raising his firm’s profile, so it could compete with the likes of Hargreaves Lansdown which has more than 1m clients.
Bell is still one of the company’s largest shareholders, with a 25.5pc stake, but sold down around 2.8pc of the company when it listed for £651m, pocketing around £18m.
The Liverpool-born entrepreneur claimed he isn’t a fan of ‘fashionable clothes and fast cars’, and that the money was probably ‘in a bank somewhere’ – although he conceded ‘Mrs Bell might have bought a nice dress or two’.
Investors, who have seen AJ Bell’s shares rise 169pc since the initial public offering, seemed to be taking the chance to cash in their gains, as the stock slipped 2.3pc, or 10p, to 421p. Its larger peer Hargreaves Lansdown announced that one of its founders, Stephen Lansdown, was selling down shares in his company. Lansdown reduced his stake from 10.9pc to 9.3pc, pocketing around £170m. His former business partner Peter Hargreaves still owns more than a third of the company. Shares edged down 0.9pc, or 20p, to 2272p.
The FTSE 100 ended down 1.4pc, or 103.15 points, at 7231,04 points as Brexit and trade worries weighed on industrial companies.
Outsourcer Serco boosted its value by announcing it would acquire an engineering business which serves the US navy.
Even though Serco announced plans to issue up to 11.2m shares, raising around £130m to help fund the £178m deal, shares ended the day up 7.4pc, or 9p, at 130.1p.
Hollywood Bowl continued its series of strikes with investors, with revenues up 5.3pc to £67m in the six months ending March 31. Profits rolled in 12.5pc higher at £16.4m. Shares in the bowling company climbed 5pc, or 11.5p, to 237.5p.