Private Equity Shakedown #1: SeaWorld (SEAS)
Peter Yesawich is a travel marketing expert with MMGY Global. In 2009, Yesawich had this to say about Blackstone’s $2.7 billion purchase of Busch Entertainment Corporation: “SeaWorld probably will sleep better at night knowing it has Blackstone’s backing, resources, and its keen understanding of the industry.”
Given that Busch was on the market as a result of its parent company’s sale to InBev; its acquisition by the private equity firm definitely ended the uncertainty surrounding Shamu’s future.
That said, it didn’t come without a cost. When SeaWorld (SEAS) was sold to Blackstone it had zero debt. One year later, the theme park was saddled with $1.4 billion in long-term obligations and an annual interest expense of $134 million. On the fee side of the ledger, SeaWorld entered into an advisory agreement with Blackstone that paid it $17 million over three years for strategic and structuring advice and another $47 million to terminate the agreement upon going public in April 2013.
It’s one thing to saddle the company with debt. It’s another to charge $64 million over three years for services that should have been provided for free in its role as owner. If that’s bullying your way to profits, I don’t know what is.