By Neil Maidment
LONDON (Reuters) - Destined to form models of the Burj Khalifa and Tokyo Tower, 90 million toy bricks will be used in new Legoland Parks in Dubai, Japan and Korea by 2017, building blocks in British operator Merlin's (L:MERL) expanding empire.
The theme parks, which each house 30 million Lego bricks and offer youngsters rides and shows, make up 30 percent of Merlin's 1.2 billion pound ($1.9 billion) revenue and are a big part of its punchy expansion plans for North America and Asia.
Lego, the world's biggest toy brand, is big business in the United States. In China, demand for Western brands from a growing middle class is creating opportunities.
The world's second largest operator of visitor attractions behind Disney (N:DIS), Merlin serves some 60 million people a year. It sees scope to extend its nine Legolands to 20, and its raft of short-stay sites such as Madame Tussauds, Dungeons and Sea Life Centres to over 100 globally.
"North America, which is Lego's biggest market, has got the opportunity for us to have three more Legoland Parks," said Merlin boss Nick Varney, whose firm holds the exclusive license to operate the Lego brand from Kirkbi, its major shareholder.
"We also think China has the opportunity to take three to five and we're looking at preliminary sites in both countries."
Investors see growth potential. At 378 pence, Merlin shares are 20 percent above the price at which they listed at on the London stock exchange in November 2013.
Jefferies analyst Mark Irvine-Fortescue said the group had strong prospects, reiterating a buy rating.
"The company is well placed to capitalize on attractive industry trends including growth in leisure spend, expansion of the middle class in emerging markets, increase in international tourism, and growth of the short-break market," he said.
After Korea the next Legoland will open in the United States or China in 2019 or 2020, Varney told Reuters.
"China is going theme park crazy at the moment," Varney said, noting that both Disneyland and Universal Studios were opening resorts in Shanghai and Beijing respectively.
HERE COMES SHREK
Property investor interest in Legolands, which at around $300 million cost roughly a tenth of a Disneyland, is strong, Varney said. Legoland Korea, which will be built on the island of Jung-do, an hour's drive from Seoul, has been backed by local business, the province and central government.
Legolands aside, Merlin is also opening 6-7 short stay sites, such Madame Tussauds and Sea Life, annually, creating city clusters across Europe, North America and Asia.
Its San Francisco Dungeon, its first outside Europe, has traded well, while in Shanghai attendance at its Madame Tussauds waxworks has doubled in five years.
The addition of a Shrek-themed brand next year, following a tie-up with Dreamworks (O:DWA), will boost those ambitions and potentially increase annual openings to eight or nine.
The expansion is part of Merlin's target for a three-way revenue split from Europe, North America and Asia Pacific within a decade -- versus 65 percent coming from Europe now.
Acquisitions also remain an option, Varney said.
The firm remains in the market for short-stay site acquisitions at the 60-70 million pound mark and is open to snapping-up standalone theme parks to bolster a division which already includes Alton Towers in Britain and Gardaland in Italy.
(Editing by Keith Weir)