The sale would also have Apollo Management take responsibility for the $1.6 billion in debt Cedar Fair current holds. The owner of Cedar Point, Kings Island, Knott's Berry Farm and other regional amusement parks, Cedar Fair has increasingly struggled to management its debt load over the past year. An official announcement is expected within the next couple of days.
So far, this is the only public article on the net is at sanduskyregister.com.
Update from Robert: Deal's done. Add the cash and the debt and you get about $2.3 billion.
Does that number sound familiar? It should. That's the amount that Blackstone paid InBev to obtain the Busch Entertainment Corp. theme parks, now rebranded as SeaWorld Parks & Entertainment. (InBev's got an option on an additional $400 million in SeaWorld revenue, so the final price could go as high as $2.7 billion.)
Given that the latest TEA/ERA report has the former BEC parks attracting 23 million in 2008 attendance, and Cedar Fair doing 22.7 million, it wouldn't be surprising that the two chains would fetch very similar prices. I wonder if Apollo didn't look at the BEC sale price, subtract the Cedar Fair debt and say, "hmm, $700 million sounds about right." (FWIW, I think that SeaWorld Parks should be worth more than Cedar Fair, given the value of the company's stronger brand names and better park locations.)Tweet
Let this be a lesson, future theme park managers (heck, it's a lesson for future managers in any business). Debt-financed acquisitions during boom times of assets worth almost as much or even more than you are will sink your business when the economy, inevitably, turns.
See: Premier Parks (Six Flags), and now, Cedar Fair.
They have been trying to make moves to pay down debt (ex. selling land across the way from Canada's Wonderland), but they also haven't been shy about building high profile roller coasters the past couple of years. Understandable, because you want to stay fresh and keep the turnstiles turning, but it's still a lot of money. There's also the battle between Cedar Fair and the San Francisco 49ers over the new stadium. The new stadium plans infringe upon the parking lot of Great America, and it's now about to go to court. Add to that the upcoming debt, the Son of Beast debacle, the fight over admission tax increase at Kings Island, and almost certain revenue and attendance issues with a couple of their smaller parks, and you have a heavy burden. I don't think that Cedar Fair is broke like Six Flags, but I think that they understand the lessons of Six Flags and they know they need some financial help now. Simply put, Cedar Fair is the picture of a financially stable company that stumbled upon one of the worst times in history to go into big time debt.
Regardless of the troubles, it's still a very profitable (almost a billion in revenue) and very popular company that is very capable of righting the ship. I hope that the new owners can see that, and I hope that they let Cedar Fair heads do their thing. An amusement park should be in the hands of entertainers and showmen, and the idea of corporate businessmen controlling the interest in an amusement/theme park company makes me apprehensive...especially when I'm surrounded by their parks.
That being said, if there is trouble coming that we don't see, it's not easy to find a buyer for such a large company in these times. They may feel that they are taking a huge gamble by not selling when there is a buyer. There is a provision that allows the company to solicit bids for the next 40 days, which might bring someone else to the table. That and as the above post said, it has to have 2/3 approval. The price Apollo is offering per unit is almost 50% over the closing price prior to the announcement. Of course that doesn't help the investors who have been around a long time and have seen the stock go from around $30 to under $10. It may however net a nice payday for the big shareholders...for example, Cedar Fair upper management. It's not easy for them to ignore that when making the decision. This is a company that will assume their debt, give Cedar Fair deeper pockets, and the board and upper management will get a payday for their stock and presumably get to keep their jobs.
The sale isn't necessarily a bad thing, as long as the owner properly funds the company and leaves the park business up to park people. That is the million dollar question with this whole thing. I do think that maybe corporate is throwing in the towel a bit prematurely.
And here are the latest earnings from Anheuser-Busch InBev (with the BEC data).
If this new mgmt company allows Cedar Fair to continue operations, and they in turn apply all the now freed up revenues toward park infrastructure and new additions, I can see improvements across the board. Who knows, we may even see some themed, narrative attractions in the future, especially if the only thing that was holding Cedar Fair back from stretching their imaginative wings was extra capital!
I am sure the major expansion for Cedar Fair is going to continue at the hotspots like King's Dominon and Knotts, where populations are huge, but what this change means to small market parks like Worlds of Fun is anyone's guess. We'll just have to wait and see.
Still, getting out of debt is always a good thing!
The man scoffed at *email*. No joke.... when I worked for Paramount Parks and (briefly) met him and his managment team in 2006 during the purchase, he boasted that his team sends him *fax* updates of each park's daily attendance.
I wish I were joking.
One flaw in your magnanimous gesture of good will toward all those folks employed at Worlds of Fun: the park has been operating in the black for years. It is actually a fairly profitable park.
Why close down a cash cow?
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