Vote of the week: Who should buy the SeaWorld and Busch Gardens theme parks?
Written by Robert Niles
Could SeaWorld soon become Six Flags Over the Sea? According to a Reuters report, Six Flags is one of the companies looking at buying SeaWorld Parks and Entertainment, as the owner of the SeaWorld and Busch Gardens theme parks approaches its initial public offering.Tweet
We've known that Blackstone Group, the private investment group that bought SeaWorld for $2.3 billion in 2009, has been looking to cash out. Reuters broke the story about SeaWorld's IPO last month, and now the wire service says that SeaWorld might be entertaining offers to buy the whole thing, instead.
The Reuters piece specifically mentioned Six Flags and Apollo Global Management, which recently bought Great Wolf Resorts. But a sale to Apollo would be exchanging one private equity owner for another. You've got to figure that, one day, Apollo would want to cash out, too. So where does SeaWorld end up in the long term?
With 23.6 million visitors in 2011, according to the TEA/AECOM theme park attendance report, SeaWorld Parks and Entertainment attracted nearly as many visitors as Six Flags, which drew 24.3 million that year. But SeaWorld does not see itself in the same class as Six Flags. Speaking with its managers, it's clear that SeaWorld aspires to take on Universal and Disney, which attract millions more visitors a year and can draw upon the deep pockets and intellectual property of parent corporations.
SeaWorld needs to get bigger to play with Disney and Universal, which suggests an acquisition or merger with some other entertainment firm. But which one?
Let's look at the possibilities:
The Walt Disney Co.
Disney's never bought another company's theme parks, so this seems an impossibility. If SeaWorld had built four-star, convention-friendly hotels at each of its properties, I suspect that Disney would have given SeaWorld a close look, simply as an option for a substantial expansion of DVC. SeaWorld/Busch Gardens hotels and theme parks could have been popular options for DVC members looking beyond Orlando and Anaheim. But SeaWorld didn't get into the hotel resort business, so I think you safely can scratch Disney from this list.
The owner of the Universal theme parks just wrote a big check to Blackstone, buying out its half of the Universal Orlando Resort. But the two chains would appear to complement each other creatively, with Universal developing attractions from the worlds of fantasy and SeaWorld creating ones from the world of nature. Universal Orlando and SeaWorld Orlando have packaged tickets in the past, and coming together under the same owner would help create an even more compelling challenger to Walt Disney World. But what about the rest of the chain? Universal Studios Hollywood and SeaWorld San Diego stand too far from each other to generate much synergy. And I can't see that Universal has any desire to enter SeaWorld's other markets. Universal doesn't have a timeshare product like DVC.
The Reuters story estimates SeaWorld's market cap around $4 billion, which would make it more valuable than Six Flags, which has a market cap around $3.3 billion. So stop me if you've heard this story before. Premier Parks' leveraged buyout of the larger Six Flags chain (whose name it took) nearly sunk the chain, ultimately leaving it in bankruptcy. New CEO Jim Reid-Anderson has gotten Six Flags' finances in order, but does the chain really want to jeopardize its new-found fiscal health with what would have to be another leveraged deal? Wouldn't SeaWorld's building and attraction standards suffer with an over-leveraged new owner that didn't exactly have a sterling reputation for thematic quality in the first place?
That said, the geographic markets line up well here. The only markets where both chains have parks are San Antonio and Southern California. In SoCal, SeaWorld San Diego and Six Flags Magic Mountain stand more than 100 miles apart, so there's not much synergy there. But SeaWorld San Antonio and Six Flags Fiesta Texas could be packaged into an attractive two-park ticket. And would Six Flags executives or roller coaster fans salivate more over the prospect of Busch Gardens Tampa becoming the long-rumored Six Flags Over Florida?
With a market cap of just $2.0 billion and fewer annual visitors than SeaWorld, Cedar Fair also would be trying to buy a chain bigger than it is. Cedar Fair made a big acquisition of Viacom's Paramount Parks not too long ago, so it's hard to imagine Cedar Fair coming up with the cash to pull off an even bigger deal for SeaWorld. And the markets don't line up as neatly as they do with Six Flags -- what would happen with Kings Dominion and Busch Gardens Williamsburg under the same owner? That said, Cedar Fair must covet SeaWorld's license with Sesame Street, which would represent a huge upgrade over the moribund Peanuts franchise for its expansive kiddie lands. New Cedar Fair CEO Matt Ouimet is a veteran of Disney and Starwood, so he knows world-class theme parks and hotels and might be able to do wonders with SeaWorld's assets. If only he had the cash.
Merlin is the world's second-biggest theme park chain by attendance (behind Disney), and has experience owning animal attractions with its SeaLife aquariums. Merlin's Legoland theme parks offer an education-friendly message that would complement SeaWorld well. But there are two huge challenges blocking this deal. First, Merlin's policies prohibit the type of animal performances SeaWorld's known for. And, second, Merlin's biggest owner is… Blackstone. Blackstone's looking for a payday here, not a journal transfer. Forget it.
How about an entertainment company that's not yet in the theme park business? If any of the nation's top cable channel owners wanted to challenge Disney and NBCUniversal by expanding into theme parks, Discovery Communications buying SeaWorld would seem the most logical thematic fit. The creators of "Shark Week" owning SeaWorld? With Discovery Channel and Animal Planet in the corporate portfolio, synergy abounds with this deal. This would also allow SeaWorld management to stay in place, while giving the company some additional financial resources to expand into hotels and TV-themed attractions. C'mon, who wouldn't want to see a Mythbusters theme park show?
Your other major cable-channel companies are Time Warner, Viacom, News Corp, and Scripps, but Time Warner and Viacom abandoned the theme park business in the past, selling Six Flags and Paramount Parks, respectively (see above). I cannot imagine SeaWorld's environmental messages fitting into the News Corp portfolio, either. That leaves Scripps, which has a market cap of $8.8 billion, but Food Network and HGTV aren't nearly as complementary to SeaWorld as Discovery's properties.
So for the sake of this little hypothetical, let's assume that one of these companies someday will either own or be owned along with SeaWorld Parks and Entertainment. Which company would you like to see become SeaWorld's new home? To keep us with five options, I'm eliminating Merlin and Scripps, leaving you with a choice of Disney, Universal, Six Flags, Cedar Fair and Discovery.
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