Cedar Fair ends buyout deal
Cedar Fair and Apollo formally pulled their buyout deal today. Apollo gets $6.5MM for their trouble and FUN is right back where it was before. Credit markets are much better now, so they have quite a bit more flexibility. Management added a "rights offering" meant to protect the little guy shareholder (or unitholder in this case). But it's really just management and the Board trying to protect their jobs.
And the largest stockholder in FUN said they have had talks with the guys buying Six Flags about a merger, but nothing imminent there either. The saga continues...
Update from Robert: Here's a write-up from the Plain Dealer, with some numbers for your crunching pleasure.
told you so...
The debt load, as it currently stands, is a huge problem for Cedar Fair going forward. Theme parks are a capital-intensive business, and if you don't have money for new iron every year, you'll bleed market share until your survival is in question.
You are correct with your last statement sir...everyone in the stock market has a price.
I still think that FUN would be a better company going forward by selling parks, and concentrating on Cedar Point, Kings Island, Knott's, California's Great America, Worlds of Fun, Canada's Wonderland, Kings Dominion and Carowinds. (And the water parks.) Use whatever income it can get from selling Valley Fair and Dorney (as well as the management contract for Gilroy - though it could cost to get out from that) to retire debt, restructure the rest, and hire a hotshot creative director to find the best iron installation concepts they can for the remaining seven parks.
Cedar Fair's debt load is managable. Even in 2009, which was a brutal year as far as both the economy and weather, the company paid $68MM in dividends and repaid $161MM of it's term loan. That's 9.5% of total debt. The amazing thing about the Apollo deal was the company was ADDING debt. This was a panic deal done by a management team unable to navigate Wall Street. While Kinzel may remain safe (he's only got a couple more years there anyway), there will be huge pressure to make changes in the second tier of management.
This article has been archived and is no longer accepting comments.