Last week, London-based growth investor Palamon Capital Partners disposed of the majority of its interests in StarParks Group, owner and operator of a series of themed leisure parks in Europe. However, its decision to retain Germany’s Movie Park, and recent acquisitions by a number of other financial investors recently, shows that leisure parks still hold an attraction for private equity firms. Giuseppetti: theme parks offer stable growth
Palamon originally acquired the European division of US-based operator Six Flags for €155 million ($200 million) in April 2004, renaming the business StarParks Group.
“What we’d like to do,” says Giuseppetti, “is effectively continue the work we started a couple of years ago in repositioning the asset in its local market, keeping the movie theme, but moving it more towards families and away from the purely teenage focus.”
Palamon has already spent the last two years investing in Movie Park Germany, says Giuseppetti, including acquiring new assets and in-park attractions, “so that people spend longer inside the gates” as well as driving up the number of visitors.
According to Giuseppetti, the park was able to attract up to two million customers per year under its previous ownership and the Warner Brothers brand. “The park has amazing capacity in terms of penetration, but currently has around one million visitors per year,” he says. “It definitely has the infrastructure and capacity to more than double that, so the real challenge will be to come up with the right marketing message for the park rather than reconstruction or heavy investment.”
Giuseppetti says that this is partly achievable due to the firm’s bullishness about the German consumer. “We’re bullish about Germany in general, having recently acquired Loyalty Partners [a 60 percent stake in Germany’s largest loyalty card scheme operator in a €225 million deal], which is our largest deal to date after the original StarParks acquisition,” he says. “The German consumer is finally spending a bit more and the economy is picking up. While it’s a gradual improvement, we think that over the time horizon of the next two or three years we can have good success in Germany, particularly in this park.”
Giuseppetti: theme parks offer stable growth
US private equity firm The Blackstone Group has also made a number of forays into the European leisure sector, including last July’s €375 million acquisition of Danish-headquartered Legoland and the £102.5 million purchase of Merlin Entertainments in May 2005, which includes 28 attractions under brands including Belgium’s Earth Explorer and the UK’s Sea Life Centre. In 2000, Blackstone acquired Rank’s 50 percent stake in Universal Studios Escape.
“There are very good repeat revenue streams in leisure parks,” says Giuseppetti of private equity’s interest in the sector, “and although it’s modest growth, perhaps two to three percent per annum, it is stable. In addition they are asset-based, which remains attractive as they are leverageable, but it also means that there are big barriers to entry, so the market is focused on existing parks rather than new builds. This means that there will be a hunger for consolidation in the next couple of years, which is an opportunity not just for the big private equity players but also for the mid-market.”
Giuseppetti adds that a number of park operators in Europe are considering or implementing accommodation as a way to stretch the business beyond a one-day attraction, such as Parc Asterix, near Paris, which has an in-park hotel and deals with local partner hotels. Despite this, Giuseppetti says that the Movie Parks Germany will maintain its local focus for now.
Whatever attractions European leisure parks provide in the future, private equity firms seem likely to be along for the ride in garnering maximum value from their assets.