Hermes Private Equity buys Merlin

Hermes has acquired the European attraction operator from Apax Partners and JPMorgan Partners in a secondary buyout valuing the business at £72.5m.

Hermes Private Equity, the private equity arm of Hermes Pensions Management, has backed the secondary buyout of Merlin Entertainments, the European attraction operator and owner of the Dungeons and Sea Life brands in a deal valuing the business at £72.5 million ($138 million; €108 million).

The business is being acquired from funds advised by Apax Partners and JPMorgan Partners, which acquired the business in 1999 for $77 million. The deal is backed by a new banking package agreed with the company's existing bankers – Hypo Vereinsbank, as mandated lead arranger, and Royal Bank of Scotland. Apax and JPMorgan’s return on investment has not been disclosed.

Since it was established in January 1999, Merlin has doubled its Dungeon chain of sites to four. Merlin now has 24 major attractions across Europe with 5 million visitors annually.

Hawkpoint Partners advised Apax on the sale of its interst in Merlin.

The deal is the second direct investment announced by Hermes Private Equity since the firm’s buyout fund was launched last year. In December, Walbrook, the trust and company services arm of Deloitte in the Channel Islands and Isle of Man, was the subject of a £50 million-plus management buyout backed by Hermes.

Hermes Private Equity’s direct investment team, which manages the HPEP I fund, is now six-strong, having been formed when Rod Selkirk joined from Bridgepoint Capital in April 2002. The most recent appointment was Justin Ward, who was recruited from CVC Capital Partners in September 2003. The firm has nearly £1 billion committed to the asset class as an active investor in external private equity partnerships.