London Eye owner Merlin puts float plans on ice

By KARL WEST
Updated: 04:49 EST, 12 February 2010

Market turbulence has dashed hopes for a flood of private equity-backed flotations this spring, as the owner of Madame Tussauds and the London Eye became the latest group to put float plans on ice.

Merlin Entertainments, backed by buyout group Blackstone, insists it continues to evaluate all its ownership options, including an Initial Public Offering.

However it is thought the theme park operator was preparing to announce plans to pursue a £2bn stock market listing as early as next week. Sources said current volatile market conditions meant it was no longer viable for Merlin to go for an early IPO.

Standstill: Merlin is the latest group to put flotation plans on hold 

Merlin chairman Sir John Sunderland said: 'All options, including an IPO, remain under consideration, but we do not expect to reach any conclusion in the near future.'

On Wednesday, airline and hotels booking firm Travelport - also backed by Blackstone - pulled its £1.2bn float after it failed to win enough support from institutional investors at the required price.

Other potential deals have also run into trouble in the last week, as the Greek debt crisis unnerves investors. An auction of retailer Matalan was scrapped after private equity bidders baulked at the £1.5bn asking price. Pressure may increase on New Look, which has already announced float plans, to shelve them for now.

Recent developments could dent hopes of takeover and flotation activity staging a concerted recovery this year. Kraft's successful bid for Cadbury and KKR's purchase of pet accessories chain Pets at Home had raised hopes of a flood of activity.

Charles Stanley's Jeremy Batstone-Carr said the IPO setbacks were 'highly significant' because it was a 'pretty negative indication of investor confidence'.

Some analysts noted City punters are now more cautious about investing in private equity-backed companies following Debenhams' poor showing since returning to the market in 2006 after being taken private by Texas Pacific, CVC and Merrill Lynch Private Equity in 2003.

Batstone-Carr said: 'There are well known concerns about what is left for investors when private equity have taken the knife to companies.'

As a result, he said there is a gap between what City investors want to pay and what buyout firms want, forcing private equity groups to retain their investments.