On March 24th, Blackstone sold its stake in SeaWorld Entertainment Inc. for $448.5 million to Zhonghong Group, a Chinese holding company that focuses on opportunities in the leisure and tourism space. Prior to the sale, Blackstone was SeaWorld’s largest shareholders with 19.5 million shares. Zhonghong Group agreed to purchase Blackstone’s stake in the theme park for $23 per share, which represents a 33% premium from the previous day’s closing price of $17.31.
SeaWorld Entertainment Inc. headquartered in Orlando, Florida, first opened its doors in 1964 and was owned by Anheuser-Busch prior to Blackstone’s acquisition of the theme park in 2009. The company was originally planned as an underwater restaurant, but the initial idea eventually grew into a marine zoological park. The first park was located on 21 acres along the shore of Mission Bay in San Diego and drew more than 400,000 visitors in its first year of operations. Since then, SeaWorld opened two more parks in Orlando and San Antonio. On December 1st, 2009, Blackstone acquired a 100% equity interest in SeaWorld Parks and Entertainment as well as SeaWorld LLC from Anheuser-Busch Companies for $2.7 billion. In 2011 and 2012, Blackstone performed a dividend recapitalization and received a total of $610 million in dividends from the theme park. In 2013, Blackstone was considering potential exit strategies. The private equity giant received offers from Apollo Global Management, Onex Corp., and Six Flags, but Blackstone ultimately decided to pursue an IPO exit strategy. In April 2013, SeaWorld sold 26 million shares at $27 per share. The main reason Blackstone chose not to sell its entire stake was that the firm expected the IPO to yield better returns than a sale at the time.
Shortly after SeaWorld’s IPO, the infamous documentary Blackfish was released, which highlighted the inhumane treatment of the park’s killer whales and flawed safety protocols of the theme park. As a result of the negative publicity, the stock dropped from a high of $38.88 shortly after the company’s IPO to an all-time low of $12.15 in September 2016. In addition to negative publicity reducing foot traffic in its theme parks, SeaWorld also faced legislative pressures. In May 2016, SeaWorld announced that it would no longer breed killer whales as a result of California legislation that banned captive breeding. After further pressure from animal advocates, SeaWorld announced that it would end its orca shows in San Diego. In addition, the company would end the orca shows at its Florida and Texas theme parks in 2019. Moving forward, SeaWorld plans to pivot from orca shows to natural orca encounters. While the remaining orcas stay in captivity, SeaWorld plans to focus on orca enrichment and overall health to maintain a positive public image.
Nevertheless, Blackstone’s investment in SeaWorld has been profitable overall with the private equity giant nearly tripling its original investment. On March 24th, Zhonghong Group acquired a 21% stake in SeaWorld from Blackstone. The sale is one of the many Chinese acquisitions in the western entertainment space. For example, Dalian Wanda Group, China’s largest commercial property owner and the world’s largest cinema chain operator, acquired AMC Entertainment and Legendary Entertainment Group in 2012 and 2016, respectively. Zhonghong Group has plans to partner with SeaWorld to develop and design theme parks in China, Hong Kong, Taiwan, and Macau. An Asian expansion would be ideal for the SeaWorld, and Zhonghong Group has a strong management team with experience in theme parks, family entertainment, and real estate development in Asia. SeaWorld will add two extra seats to its existing Board consisting of 9 members to accommodate for two Zhonghong executives. A provision of the agreement was that the Chinese investment firm cannot own more than a 24.9% equity interest in SeaWorld without the approval of independent directors. Moving forward, the sale could be the pivotal catalyst that enhances SeaWorld’s financial performance.