(Bloomberg Opinion) -- Private equity managers sure love water slides. The chlorine must smell like money.
On Wednesday, Blackstone Group Inc. became the third private equity firm in just seven years to splash down at Great Wolf Resorts Inc., a chain of indoor water parks and lodging with more than a dozen locations around the U.S. The investor is taking a 65% controlling stake in the business through a $2.9 billion joint venture alongside Centerbridge Partners LP, Great Wolf’s most recent private equity owner.
Blackstone, which has $545 billion of assets under management, has been on a “family-fun” streak: The firm helped take Merlin Entertainment, the owner of Legoland, private this year (its second go-round with Merlin), following a seven-year lucrative investment in SeaWorld Entertainment Inc., which it exited in 2017.
Great Wolf, whose mascot is Wiley the Wolf (a talented dancer, according to fan pages), was first taken private in a leveraged buyout by Apollo Global Management Inc. in May 2012 for $740 million, plus debt. It was one of the most heated LBO bidding wars in recent memory. Private equity firms were “tripping over themselves to bid,” one analyst said to me at the time. In the end, Apollo was forced to raise its offer by 69% to beat out rival suitor KSL Capital Partners LLC. The transaction valued Great Wolf at nearly 10 times trailing 12-month Ebitda, a rich valuation as far as these kind of deals go. It’s not your typical private equity situation, though.
The term LBO often conjures images of wilting businesses being bled dry. But Blackstone – like Centerbridge and Apollo before it – sees Great Wolf as a growth opportunity. In 2012, Great Wolf had 11 properties, from the Pocono Mountains, to Grapevine, Texas, as well as its original location in Wisconsin Dells, Wisconsin, which traces its roots to a predecessor water park owned by a family-owned business that first opened in the 1970s.(1) A stay in the Poconos later this month for two adults and two children costs about $400 to $500 a night, according to the booking site. Passes to the water park – where guests can take a plunge down Coyote Cannon and try to cross Big Foot Pass – are included in the price.
Under Apollo’s ownership, Great Wolf added a resort in Fitchburg, Massachusetts, and began building another in southern California. Apollo then sold the chain to Centerbridge in March 2015 in what’s known as a secondary buyout. At the time, Reuters reported that the deal was valued at $1.35 billion, including debt, and that Apollo stood to make two-and-a-half times its investment.
With Centerbridge, Great Wolf opened five more resorts, including locations in Georgia and Illinois last year. It’s also been investing in room renovations. “We are enthusiastic about partnering with Blackstone to continue accelerating the growth of the company,” William Rahm, a senior managing director at Centerbridge, was quoted as saying in Wednesday’s press release. Blackstone’s Tyler Henritze, head of U.S. acquisitions for its real estate arm, said: “We look forward to investing in these properties to further deliver for guests and grow the company.” You don’t normally see the word “grow” so often in private equity talk.
Then again, you don’t often see suit-and-tie-wearing dealmakers so passionate about water slides.
(1) The last name of the family thatfounded the water parks is, rather appropriately, Waterman.
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Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.
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