Shareholders of DXB Entertainments advised to accept Meraas’ acquisition offer

The shareholders of DXB Entertainments (DXBE), the operator of Dubai Parks and Resorts, have been recommended by the company to accept a takeover offer from its parent company, Meraas Leisure and Entertainment after its losses for 2020 widened.

The theme park company needs new funding and without further support its current available liquidity is likely to be exhausted in the second quarter of 2021, DXBE said in a statement to the Dubai Financial Market (DFM), where its shares trade. Its available cash balance at the end of 2020 stood at $108.9 million, the company said.

DXBE’s board “unanimously recommended” shareholders accept the offer made by Meraas in December at the company’s general assembly meeting on March 9.

“The board believes that the offer safeguards the interests of DXBE and is the only viable route for DXBE shareholders to recover value from their investment while also seeking to protect the interests of other stakeholders, including employees, suppliers and customers,” the board said to DFM.

Meraas’ offer

Meraas Leisure and Entertainment and its parent Meraas Holding have a 52.29 percent stake in DXBE.

Meraas has already issued a notice to DXB Entertainment that it will convert a $403 million bond and has offered to acquire the company’s $1.15 billion debt in return for newly-issued shares in the business. The capital restructuring will increase Meraas’ shareholding in the indebted company to 93.92 percent. Following this, it will look to buy out minority shareholders and take the company private.

Under the terms of the proposed deal, DXBE’s shareholders will receive $0.022 in cash for each share held through participation in a tender offer which, subject to certain conditions, is expected to be launched in January 2021, DXBE said in a statement in last December.

Pandemic impact

With the company’s accumulated losses now standing at 98 percent of its issued share capital, the alternative to the Meraas offer is potential dissolution and liquidation of the company, the board said.

“2020 was a tremendously challenging year with major disruptions in travel and tourism as a consequence of the COVID-19 pandemic. The closure of the destination for a period of approximately six months had a significant impact on our operational and financial performance. In 2021, while material uncertainty around near term general economic conditions remains, we continue to focus on identifying and implementing further operating efficiencies and preparing for a potential recovery in visitation.”

Dubai Parks and Resorts, first opened in October 2016, features a Legoland Dubai, Bollywood Parks Dubai and a Motiongate theme park. The theme parks have incurred losses as visitors numbers have been below projections. A phase two expansion of the park, to add a Six Flags Dubai theme park, was cancelled in 2019. Despite a reorganization of park assets and a cost-cutting exercise, it continues to lose money.