Shares in Merlin Entertainments (LON:MERL) have surged in London in today’s session as an activist investor urged the company to go private. The Legoland owner, however, noted that it would be best for shareholders if it pursued its current strategy.
As of 12:59 BST, Merlin’s share price had added 6.53 percent to 353.70p, outperforming the FTSE 250 index which currently stands 1.24 percent in the red at 19,067.49 points. The group’s shares have given up more than seven percent of their value over the past year, as compared with about a nine-percent fall in the mid-cap index.
Merlin urged to go private
Reuters reported today that hedge fund ValueAct had said in an open letter to Merlin that the level of investment needed by the company meant that it would be better off with a return to private ownership.
“While Merlin obviously thrived as a private company, it may have come public too quickly,” the fund pointed out. ValueAct is Merlin’s second-largest shareholder with a 9.3-percent stake.
The hedge fund reckons that the mid-cap group “could deliver value in the mid-£4GBP/ share for shareholders in a public to private transaction,” marking a premium of about 30 percent to Merlin’s current and recent average share price.
The Legoland owner responded to the letter in a statement, noting that it had “had recent discussions with ValueAct Capital, including their perspectives on the options for the Company, and intends to continue the constructive dialogue that it has had to date”. Merlin, however, also noted that its board “regularly considers all options for driving shareholder value and has concluded that it remains in the best interests of all its shareholders to continue to pursue its current strategy”.
Analysts on mid-cap group
Peel Hunt reaffirmed Legoland as a ‘buy’ today, without specifying a target on the Merlin share price, while Liberum Capital continues to see the company as a ‘hold’. According to MarketBeat, the mid-cap group currently has a consensus ‘hold’ rating and an average valuation of 389.45p.