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Last Updated: Wednesday, 13 July, 2005, 10:08 GMT 11:08 UK
Troubled Lego sells theme parks
Young girl playing with Lego horse
Lego remains committed to its core toy business
Danish building block firm Lego has sold control of its theme parks to investment firm Blackstone Group for 375m euros (259m; $456m).

Blackstone will set up a company to run the Legoland parks as well as Sea Life, Earth Explorer and Dungeon attractions it bought from UK firm Merlin in May.

The idea is that the Legoland parks become "destination resorts", combining a number of franchises at one location.

There are four Legoland parks in Denmark, England, Germany and the US.

Bigger and better?

The new company will operate under the name of Merlin Entertainments and will be 70% owned by Blackstone. The remaining 30% will be controlled by Lego and its owners.

As well as the four Legoland locations, the company will run Merlin's 28 attractions based in eight European countries.

Cub scout in amongst severed heads at the London Dungeon
Merlin's Dungeon franchise has been a hit with the less squeamish

The combined group will be the second biggest attractions firm in Europe behind Disney.

Merlin's boss Nick Varney is optimistic about its prospects.

"We see the new partnership as an excellent platform from which to realise the growth potential of both businesses, not just in Europe, but worldwide," he said.

"Together they create a balanced portfolio of 'chainable' brands, which are transferable across borders."

'Extremely competitive'

Despite such optimism, Lego has struggled with its theme parks at a time when increased competition has battered toy sales.

Last year, Lego's net losses more than doubled to 1.9bn Danish kroner ($328m; 175m).

Sales dipped to 7.9bn kroner, from 8.4bn in 2003, with Lego blaming intense price competition for the decline.

"The toy market has been declining for some time and is extremely competitive," said Lego owner Kjeld Kirk Kristiansen.

In an effort to boost profits, the company invested heavily in a host of new markets, including computer games, baby products, camping goods and even shoes.

The company has since taken steps to reverse that strategy and said the sale of the Legoland parks will further enable it focus on its core businesses.

There are Legoland parks in San Diego in California, USA; Windsor in the UK; Guenzburg in Germany; and Billund, Denmark.

The agreement with Blackstone is subject to approval by EU competition authorities.

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