Busch Entertainment: Will Blackstone help Busch parks or take them for a ride?

Private-equity firms don't have a good track record for improving the properties they buy. They're better known for buying firms, improving efficiencies (sometimes to the company's detriment), milking them for cash, and then flipping them when they can profit. Recently I wrote the sad but familiar tale of Simmons, an iconic mattress company forced into bankruptcy from the debt load left by frequent private-equity flipping.

Will Blackstone Group (BX) do the same to Busch Entertainment? On Wednesday, Anheuser-Busch InBev (BUD) finalized a deal to sell the group to Blackstone for $2.7 billion, and the early signs suggest that this deal might go better than others.
The country's second-most popular parks-entertainment group, second only to Walt Disney (DIS)'s Disney Parks, Busch operates SeaWorlds in Florida, California, and Texas; Busch Gardens parks in Florida and Virginia; and Aquatica and Discovery Cove in Orlando.

In the deal, Blackstone will provide $1 billion in equity, and the company currently called Busch Entertainment will take on $1.3 billion in new debt. (Anheuser-Busch InBev had originally priced Busch Entertainment at $3.5 billion to $4 billion, but the price was reduced in the downturn.) The seller is also entitled to $400 million in Blackstone's initial profits from the deal. ABI is using the cash from the deal to pay down part of the $52 billion in debt that InBev incurred from buying Anheuser Busch last year.

"They couldn't have found a better company to take over the parks than Blackstone," Dennis Speigel, president of International Theme Park Services, says. "Blackstone is clearly comfortable with the business." Blackstone's Merlin Entertainments has shown with its ownership of Legoland theme parks and Madame Tussands wax museums, and its 50 percent share in Universal Orlando, that it's in the theme-park business for the long haul. And Blackstone's Merlin Entertainments has undertaken significant improvements in its other holdings, such as a 36,000-square-foot aquarium that it opened at a Legoland this year, and a Legoland water park it's planning.

Another good sign, Speigel says, was that Busch Entertainment president Jim Atchison, with his years of experience in the field, and his management team would stay on in the deal. Speigel does not expect major changes in the executive management team. "The new leadership will be much more entrepreneurial than Anheuser Busch." Spiegel predicts that more properties will be developed nationally and internationally, and that Busch will become a stronger competitor to Disney.

Another big question in the Orlando area, where I'm based, is whether Universal Orlando will become part of the Busch Entertainment group. That's not in the cards now -- Blackstone and NBC Universal each own 50 percent -- but Speigel thinks the deal gives the parks an opportunity to work together through Disney-style homogenization. Disney picks customers up at the airports, handles their bags, and provides transportation among its parks -- visitors don't even need to rent cars -- and Busch Entertainment and Merlin could create similar experiences to keep customers at Blackstone-owned parks. So far, the deal is looking like a win-win for both sides.

Lita Epstein has written more than 25 books, including Trading for Dummies and Reading Financial Reports for Dummies.

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