When it comes to their portfolio companies, private equity firms much prefer making profits to making headlines—particularly when those headlines involve allegations of animal torture, and particularly when they move from the business section into the larger cultural zeitgeist.
Blackstone / SeaWorld
But that was precisely the situation in which Blackstone found itself upon the 2013 release of the documentary “Blackfish,” which shined a light on the abusive treatment of orca whales at SeaWorld and led to a wholesale transformation in the way the theme park goes about its business.
There’s a reason Blackstone is Blackstone, though. For the buyout giant, there’s no reason profits and headlines can’t go hand in hand. The firm has agreed to completely exit its stake in SeaWorld Entertainment (NYSE: SEAS), striking a deal to sell its 21% interest to China’s Zhonghong Zhuoye for $23 per share, or about $449 million—reportedly representing a 2.7x return on Blackstone’s initial equity investment.
That investment occurred in 2009, when Blackstone acquired the company then known as Busch Entertainment for as much as $2.7 billion. In 2011 and 2012, Blackstone extracted a combined $610 million in dividends from the business. After first considering a sale to Apollo Global Management or Six Flags (NYSE: SIX), SeaWorld went public in 2013 at a valuation of about $2.5 billion, and Blackstone sold a reported $1.7 billion of the company’s stock in the coming years.
Yet the price of that stock has dipped from nearly $40 shortly after its IPO to as low as $12.15 last fall, largely a response to “Blackfish” and the changes it wrought. In the wake of the film and the ensuing backlash, SeaWorld decided to phase out its use of orcas as entertainment and cease keeping the creatures in captivity, a significant change in strategy.
Nonetheless, Blackstone found a buyer willing to pay a premium of about 33% to SeaWorld’s share price before news of the deal—in the process valuing the company at about $2.1 billion, not that far off the cash price Blackstone paid eight years ago.
SeaWorld will continue to face new challenges as it tries to transform into a more conservation-minded organization, but Blackstone’s only remaining role in the whole affair is to pass out the proceeds to its LPs.
Article by Kevin Dowd, PitchBook