Just how good was the Busch deal for Blackstone?

October 7, 2009, 9:53 PM · How good of a deal did Blackstone Group get in buying the Busch theme parks from Anheuser-Busch InBev today?

Let's compare the Blackstone/Busch deal to the most recent sale of a major theme park chain: Cedar Fair's purchase of the Paramount Parks from Viacom in 2006.

Paramount Parks

Busch Entertainment Corp.

The Busch deal also includes significant branding: The Paramount Parks had to drop "Paramount's" from their names; the Busch Gardens parks will retain their names.

The Busch deal also includes the value "Shamu" brand, as well as a licensing deal with Sesame Workshop, so no attractions will be lost or have their names changed (save the already-shuttered Brewmasters' Clubs and the Clydesdales). The Paramount sale included no iconic character, forced Cedar Fair to rename immediately dozens of Paramount/Viacom-themed attractions and left Nickelodeon branding for certain kids areas for only three more years.

Let's not forget that the Busch theme parks almost certainly enjoy much higher per-guest spending than the former Paramount Parks.

So for double the price, Blackstone is getting double the attendance that Cedar Fair got, plus triple the income revenue and valuable "intellectual property" assets. And that's comparing BEC's attendance and revenue during a global recession with Paramount's during the peak year of the recent financial bubble.

For the industry, the Paramount Parks deal consolidated the field, resulting in the loss of Paramount Parks' attraction design team and leaving theme park fans with one fewer choice for theme parks. The Busch deal leaves the existing BEC management in place, resulting in no loss of options for fans.

A common downside? Debt. Cedar Fair took on $2 billion in debt to finance the Paramount Parks acquisition, as well as to pay down previous debt. And BEC will take on about $1.3 billion in debt to fund this deal (with Blackstone providing the additional $1 billion).

But even on that count, BEC crushes Cedar Fair, with BEC taking on a debt burden roughly equal to its annual revenue, while Cedar Fair took on debt about double the annual revenue of the combined old Cedar Fair and Paramount parks.

Open thread: This is the overnight/early-morning open thread, for any news and rumors you've just got to share before your editor rejoins you in the LA AM.

Replies (13)

October 7, 2009 at 10:36 PM · In reading some of the stuff posted on the Orlando Sentinel website... food for thought.
When they shuttered the Brewmasters Club and started tightening things up at SeaWorld and Busch Gardens, they said there'd be no layoffs. I guess technically, they are correct. But working for AB Marketing (as the Brewmaster's employees did), then getting transferred to BEC and switched to parking lot monitor or loading people on the Rhino Rally is almost the same as a layoff. Also, talk to the employees who are barely getting hours and the increased preference for foriegn workers that can be brought here and housed and employed for less... things are definitely changing.
October 8, 2009 at 2:48 AM · Considering all you have written, Robert, this was not just a good deal, it was a SLAM DUNK.
October 8, 2009 at 3:19 AM · To reiterate my post from yesterday: "PENNIES!"
October 8, 2009 at 6:26 AM · The way the Paramount Parks and their "design team" were going, it wasn't the worst thing in the world that Cedar Fair lost them. I would much rather have a great coaster than a half-arsed themed ride. Also, the numbers for Paramount/Cedar Fair have improved a little since 05 despite the recession. They had a billion in revenue and 23 million visitors in 2008. A quick and crude average gives the Paramount parks at least those same numbers, although they are likely higher.

Before people go completely out of their skulls on this topic, I'll raise a few points to think about. A lot of good numbers for Busch, but one I didn't see was expenditure. BEC parks are year round operations, most with a stable of animals to take care of. Higher revenues and more attendance (much in part due to 11 months of operation compared to 4 months in the northern states) also means higher cost. High quality aside, the company still has shouldered over 2 billion dollars of debt, and now have to make that money to pay it back. Keep in mind too that the economic bubble inflated the Paramount price, but it also deflated the Busch price. Had this deal gone down in 2006, the price is likely a lot higher.

I'm sure that the parks are profitable, and the state of the economy has gotten Blackstone a bit of a discount. I'm also sure though that it was the park's P&L reports (that's profit and loss for those out of the know) that had a big say in the "pennies" price.

That being said, it's pretty hard to compare these two deals by the numbers when they happened in two completely different economic environments, and when we don't know all the numbers that matter. The notion that one deal was that much better than the other has some validity when you factor in Theme Park Insider fan mania and it's perceived value of the parks. Yes they get to keep it's brands, which are of ok value (horsepee..I mean A-B beer, Sesame Street, and Shamu), but I'm thinking that the state of the economy, the park balance sheets, and Busch's status as number 3 in Orlando makes the price an good deal, but by no means the steal of the century.

Maybe we should just be happy that the Busch parks have been passed on to a reputable company that will presumably take care of them and maintain their quality and status, and hopefully expand and improve them. They will have their problems, and their markets will become even more competitive. I take comfort in knowing that I'll still be able to go to a Busch park and have a good day.

October 8, 2009 at 7:45 AM · Given that Paramount's creative team included some ex-Universal Creative folks, I don't think the problem there was talent or vision, it was Paramout's diminishing commitment to the parks. You can have a great concept or design, but if your bosses won't fully fund it, it won't be that great.

But, even at a low funding level, Paramount did more with theming and storytelling than Cedar Fair does now.

October 8, 2009 at 12:20 PM · Ahem. :)

Having been a former Paramount Parks creative type, I can reiterate Robert's comment -- we always did the best we could do given the capital expenditure, which wasn't much.

Would it have been better business to put in a "great coaster instead of a half-arse themed ride"? The numbers say no -- we never got any higher jump in attendance with a high-profile mega-coaster than we did with themed attractions.

In fact, Paramount Parks actually found more success with *family* attractions -- the Nick areas, Boomarang Bay in-park waterparks -- than they ever did with big steel. Look at a park like Great America, which floundered for YEARS, until they put in a (half-arsed, but serviceable) waterpark, and BOOM the local families arrived in droves. In every park within the Paramount Parks system, the same pattern evolved -- by focusing on a core family audience, and marketing directly to them (mostly through a very aggressive season-pass program), all of the parks had pretty steady growth (and in some cases like GA, a total turnaround).

I'm a coaster fan, too -- but you have to be realistic in the fact that big coasters are POLARIZING to an audience. Why do you think Disney doesn't put in more aggressive coaster rides? Because a larger audience often won't ride them. Coasters may get you press, but they don't get the largest amount of people through the gate.

Busch is a good example of this -- sure, they put in big coasters to get the press, but their bread-and-butter are family attractions and marketing to a much larger family audience. Do you see *any* aggressive coasters or thrill-based marketing on that new "World of Discovery" blog?

October 8, 2009 at 10:25 AM · Revenue is not profit. While BEC's revenues are triple the former Paramount Parks, feeding and housing animals and running parks year round costs plenty of money. It is doubtful that profit was triple. Net income and cash flow are the key indicators and those numbers were not in your comparison. BEC's performance may still be better than Paramount Park's on both counts, but it is impossible to truly compare the deals without all the pertinent numbers.

The other important point is that Cedar Fair bought Paramount Parks at their determined worth in 2006. I am sure they would have liked to buy them in a fire sale during the bleakest economy in half a century; but they were for sale then not now. Blackstone was in the right place at the right time and got the best deal they could hope for, because ImBev needs cash now.

Hindsight will tell if Cedar Fair made the right decision in 2006 - it probably was the right call.

October 8, 2009 at 11:13 AM · I think people have missed one of the biggest "gets" from this whole deal.

In 1972, Congress passed the Marine Mammal Protection Act. This legislation prohibits taking or selling killer whales, walruses and dolphins. While it was actively opposed by Sea World execs at the time, it ended up being a boon to the chain. Overnight they had an almost-exclusive corner on the market, being that they were one of the few chains to possess these animals prior to the bill's passage, and were thus able to still feature them in their parks.

While I wouldn't run to a park to see killer whales, it's undeniable that these flipper-beasts really do differentiate the Sea World parks from the other big-league players. It's more than just a brand...it's a whole attraction model that Sea World alone possesses. That's huge.

October 8, 2009 at 12:30 PM · Fixed the flub in the article where I used the word "income" when I meant "revenue." Sorry about that. Having way too many idiot moments today.

Great point about the marine mammals. I thought about that angle, but it would be well worth fleshing out as a story at some point.

October 8, 2009 at 1:46 PM · If you do a story on the Marine Mammal angle, Robert, you should make sure you read George Millay's biography (that and Buzz Price's book, Walt's Revolution by the Numbers, should be required reading for any theme park geek).
October 8, 2009 at 2:35 PM · You never got any jump in attendance with a mega coaster, because you never put in a mega coaster. Besides the debacle named Son of Beast, a few early rides like Flight of Fear (good by the way), Volcano, and Top Gun, what high ticket coasters were there? With the exception of a very few coasters in the chain, B&M, Intamin, and all the high profile wooden coaster companies ceased to build much of anything in the Paramount Parks. By the end of Paramount's occupation, Kings Island fans were practically begging on their knees for a new roller coaster to ride. Are coasters polarizing rides? Not necessarily. A stand up coaster with 7 loops? yeah probably. A sit down mega coaster like Diamondback? obviously not if you judge by the lines this year. Even if they are polarizing, a line to the back of the park should still send a signal that they are hugely popular and draw people. Some people don't like coasters and that's fine. That's what the other 200 acres of the park are for, building other attractions. I'm not saying that coasters are the end all be all, because they aren't. The Nick area was a huge draw, and one of the best kids areas in the business. Waterworks already existed at Kings Island when Paramount took over, so naturally the success of that model would translate to other parks in following years. There has to be balance and freshness though, particularly in a part of the country that celebrates the roller coaster and is willing to wait 3 hours to ride the newest one.

As a woman might say, "It's the little things that count", and it was the little details that were missing in many of these themed rides. Italian Job could have been a home run. It ended up being a fly ball. I agree that the talent was present in the design department, as demonstrated by early offerings and little things here and there, and I'm sure that the design team's style was cramped by budget, but that's the game of the seasonal amusement park, with or without movie studio backing. It's pretty clear that Paramount and it's bosses quit on the parks, maybe because they weren't making enough money for their liking. They should have known that it was because they weren't spending enough for their formula to work.

Busch's family attractions? Besides the wildlife and marine life, what is Busch really known for?

Kraken- Multilooping floorless coaster
Sheikra/Griffon- 200 plus foot vertical drop coasters
Alpengeist/Montu- Multilooping Inverted Coasters
Manta- Multilooping Flying Coaster
DarKastle- vampire themed flat ride
Apollo's Chariot- Megacoaster
Gwazi- Dueling wooden coaster

They build great roller coasters...most of which are unthemed. The greatness of Busch isn't the individual themed attraction, but rather the animals and the atmosphere they create around great rides...the most popular of them being? Yep roller coasters.

October 8, 2009 at 3:04 PM · I have been meaning to do a book review of the Buzz Price book for months now. (I tried to get Buzz to agree to do an interview with me, but he's long retired and declined. One of my bigger disappointments in running the site, honestly.)

Thanks for the kick in the rear. I'll try to get that review posted by the end of the month.

October 8, 2009 at 7:12 PM · I would like to clarify something about the Marine Mammal Protection Act referred to.

The posted noted the act as 'prohibiting' the taking (capturing) and selling of... marine animals (listed many types). This is not technically true. An organization (such as SeaWorld or other aquariums) can still apply for permits to collect marine animals. Thanks to the MMPA of '72 those permits are now much, MUCH harder to get approved--- but not impossible. In fact collections of marine mammals have occurred (legally) since the time of 1972.

The point that was made correctly in the previous post dealt with SeaWorld getting an almost exclusive market. While I am sure the SeaWorld people did not love some of the MMPA-- the act did (and still does) prevent just any yockle from going out and collecting marine mammals... in US waters at least. And to this day the two largest collections of bottlenose dolphins belong to SeaWorld... and the US Navy!

BTW these animals can be legally 'traded' between zoos around the world. A great example of that was when Six Flags Worlds of Adventure (former SeaWorld Ohio) brought in an female Orca from France.

Another main goal around the MMPA '72 deals with the restriction of harassing animals in the natural environment. Anyone without a permit must stay 150ft away from marine mammals in their natural environment. This also helps aquariums justify 'swim with the dolphins' type programs. Their thought is that people can have a controlled interaction with dolphins in an aquarium and leave the animals in the ocean alone.

The Marine Mammal Protection Act is up for review every few years, so changes can also be applied to the act.

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