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Is a merged Six Flags and Cedar Fair a possibility?

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Three advisory firms oppose sale of Cedar Fair, urge 'no' vote


By Shaheen Samavati, The Plain Dealer March 09, 2010, 7:47PM


CLEVELAND, Ohio -- Cedar Fair is facing yet another challenge in mustering shareholder support for the company's proposed acquisition by a New York private equity firm: three highly regarded independent advisory firms are telling shareholders to vote "no."




The company's largest shareholder, Q Investments, touted that fact on Tuesday as part of its campaign to convince other investors to vote against the deal. A vote will be taken at a shareholder meeting on March 16.


RiskMetrics Group, Proxy Governance, and Glass Lewis & Co. all agreed with Q Investments in saying they think the timing of the deal is bad, and that the sale price undervalues the Sandusky-based amusement park company. The three firms specialize in selling advice to investment firms on corporate governance issues.


A fourth, lesser-known firm, called Egan-Jones, advised shareholders to vote in favor of the deal, pointing to arguements made by Cedar Fair in its proxy statement.


Under the terms of the proposed $2.4 billion acquisition, Apollo would buy Cedar Fair's assets for $635 million, as well as pay off its more than $1.7 billion debt. Investors would get a payout of $11.50 per limited partner unit. Cedar Fair's share price closed at $11.11 on Tuesday.


Along with Q Investments, Neuberger Berman, Cedar Fair's second largest shareholder, also says it plans to vote against the acquisition. Between the two of them, the firms control nearly 30 percent of Cedar Fair shares, and therefore, votes.


Since the company needs a two-thirds majority, that means nearly all other shareholders would need to vote in favor of the deal for it to go through.


In a letter to unit-holders this month, Cedar Fair's chief executive Richard Kinzel urged every shareholder to vote.


"Your vote is important," he wrote. "No matter how few units you own."


Kinzel wrote that the company's huge debt, which will begin coming due next year, could weigh a heavy burden on the company if the acquisition doesn't go through, and if park attendance and sales don't drastically improve.


"As it stands today. . . we could be in danger of violating certain of the covenants in our credit facility," Kinzel wrote. That could mean higher interest costs for the company in the future, or an inability to refinance the debt altogether, he said.


But Colin Reugsegger, an analyst for Glass Lewis & Co., criticized Cedar Fair's board for offering few details or analysis of its debt situation.


"We believe the board has failed to establish that the proposed merger with Apollo is the best means by which to address" its outstanding debt problems, he said.


All three firms seemed optimistic in their reports that Cedar Fair would be able to find a route to managing its debt in a way that would be more beneficial for shareholders.


Q Investments declined to be interviewed. But according to Reugsegger's report, the investment firm has said that it believes Cedar Fair could negotiate with its current lenders to work out a deal that would allow it to bring back the dividend that it eliminated at the beginning of this year.


However, Kinzel told shareholders in his letter that's very unlikely.


"Based on the amount of our outstanding debt, the uncertainties of the future and the experience of the last 18 months, we believe it would be imprudent to re-instate the distribution, even if our financing arrangements allowed, until we are able to reduce our outstanding debt to an appropriate level," he wrote.


Kinzel said the deal with Apollo is a way for shareholders to avoid uncertainty and get cash for their holdings now.


Jeffrey Thomison, an equity analyst who follows Cedar Fair for Hilliard Lyons, said if the deal is turned down, he expects Cedar Fair's share price to plummet. However, if business conditions improve, he expects that shares could be trading above $15 within two years.


"It appears that the company would be able to sustain itself going forward, especially in light of the improving economy and as amusement park season approaches," Alesandra Monaco, vice president of research for Proxy Governance, wrote in her report.


UPDATE 8:21 p.m.: Speculation rises that Apollo wants to merge Cedar Fair with Six Flags


According to a story posted on the Wall Street Journal's Web site on Tuesday evening, creditors of bankrupt Six Flags believe that Apollo Global Management could be planning to merge Cedar Fair with Six Flags, if the investment firm succeeds in buying the Sandusky-based company.


According to the article, some of Six Flag's creditors think Apollo could be working with Avenue Capital Management, an investment fund that is leading the drive to take over Six Flags in Chapter 11. The Web site reported that Andrew Dash, an attorney representing Six Flag's unsecured creditors pressed Six Flag's Chief Financial Officer Jeffrey Speed during a bankruptcy hearing to tell him why representatives of Avenue Capital had made a visit to Cedar Fair.


Speed confirmed the visit, but said he could "only speculate" that Avenue was trying to learn more about the amusement park business now that it was committed to leading a $450 million equity raise to bail out Six Flags.

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Personally, I think this is the stupidest thing I have ever heard. icon_surprised.gif Lets take a company that is emerging from bankruptcy and merge it with another company that also has serious financial issues. What could possibly go wrong? icon_rolleyes.gif


Then there is the issue of naming. Is SF dropped from all names, or is SF added to all names. Does SFGAdv become Great Adventure or does CP become Six Flags Cedar Point? icon_lol.gif Then comes the issue of ride names. Would CF keep licenses this time? Knowing CF, probably not, so we could look forward to Bat-Hawk and The Dark Box and Flying Coaster. icon_lol.gif And we could also get 3 "new" kids areas - Planet Snoopy, Snoopy's Seaport, and Peanuts National Park.


Then there is the issue of policies, imagine CF and SF combining their most annoying policies. Imagine all of the coasters dropping to 1 train if it started to drizzle. Imagine GASM getting crotch-belts, every flat that doesnt already have seatbelts getting seatbelts, and operators with wireless microphones walking around having to say "check" everytime they check a restraint.

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And no re-rides allowed, that would be horrible. It is so nice to just stay in the station for multiple rides in a row at Nitro and all the other coasters if no one is waiting rather than having to waste time exiting the station, walking through the empty line and back into the station. I hate that at Dorney, especially times when there is not 1 person in the station and you still have to walk around. I'm sure they would also add seatbelts to Skull Mountain, Blackbeard's, Runaway Mine Train and The Dark Knight. And not opening up until May, Dorney doesn't open until May 1st, CP doesn't open until May 15th! Also probably tons of trims on Rolling Thunder.

Edited by Yoshi
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Don't assume everything would just change to Cedar Fair's way if this happened (which I doubt it will). This is basically a third company coming in and trying to buy both chains (at fire sale prices since both companies are in financial distress). Most likely they would either go the Blackstone route and let them run as separate entities or they would be COMPLETELY restructured into a new combined company with a new management team overseeing parts of the existing teams. And, if they were smart they would hire truly experienced theme park management people (poached from Disney/Universal/Seaworld Entertainment) who could change a lot of rules from the top down.

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Combining both companies would be the stupidest thing any company in history could ever possibly do.Wouldn't help that wouldn't be easy to pass as not being borderline Monopolistic.Having that wouldn't be good for anything because then it causes virtually no competition in many areas and hey you got yourself parks closing down left and right.Yes Competition is good and Apollo obviously doesn't get it.

Edited by Mike13
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^Unless they acquire both companies, keep the parks they like and then spin off the rest...

True,but I still see a very small chance that this happens.I do not think CF shareholders will approve the original buyout in the first place.

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I think we have a better cance of Disney buying Six FLags before Cedar Fair does. Cedar fair is too much of a competitor of Six Flags. it would be like Democrats and Repunlicans creating one united party- NOT GOING TO HAPPEN


It's not that they'd willingly come together and merge; the possibility is an outside company acquiring both companies...


And I doubt Disney would EVER consider acquiring SF; individual pieces, maybe, but not the entire chain...



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