Is Six Flags really trying to buy Cedar Fair?

October 2, 2019, 1:37 PM · [Update October 4: Cedar Fair tells Six Flags "no deal."]

I guess it's the silly season for regional theme and amusement parks now. With the summer over and the off-season looming, it appears that we need a stock rumor to heat up discussion about the nation's part-time parks.

Well, Reuters delivered that this morning, with a report that Six Flags has made a cash-and-stock offer to acquire Cedar Fair. The news agency attributed anonymous sources and provided no details on the proposed deal.

Analysts at Wells Fargo quickly discounted the report, citing the management uncertainty at Six Flags (the company is looking for a replacement for retiring CEO Jim Reid-Anderson) and the different cultures within the two companies.

But the initial report was enough to send Cedar Fair's stock up like the launch of Top Thrill Dragster, jumping 10 percent upon its publication. Cedar Fair's stock [FUN] has come back down but remains up a couple of points in late-day trading.

I'm with the Wells Fargo analysts on this one. A SIX-FUN deal makes almost no sense, not from a business standpoint and absolutely not from a customer's one. The only place this deal makes sense is on the map, where a blended Six Flags/Cedar Fair company would pretty much corner the nation's regional theme park marketplace. The only regional markets where the two chains both operate is the huge Bay Area and Southern California markets, where Six Flags Magic Mountain in Los Angeles County and Knott's Berry Farm in Orange County don't really cannibalize as much as they complement each other. Given Six Flags' business focus on selling memberships that include admission throughout the chain, the addition of the Cedar Fair parks would make those memberships much more attractive, likely allowing Six Flags to segment more price points and drive additional revenue.

But at what cost? After paying a necessary premium to acquire Cedar Fair, would a plussed Six Flags have any capital left to buy the new rides it would need to keep theme park fans from spending their money on trips to Disney or Universal — or remaining independent parks such as Hersheypark and the Herschend properties? Would Cedar Fair customers keep visiting Knott's and Cedar Point and Kings Island if those parks were operated as Six Flags parks?

Maybe, maybe if this were an attempt to buy Cedar Fair's management team to come in and run the Six Flags parks to Cedar Fair's standards... but with Six Flags's membership scheme to drive the revenue, I could squint hard and possible begin to see something here. But it seems a lot more likely to me that someone just wanted to pump a stock price for a quick pay day here.

Whatever happens here... welcome to silly season.

Replies (11)

October 2, 2019 at 1:53 PM

After decades of being in the industry and watching the ups and downs of both companies I truly and honestly think Six Flags is doing this because the only way they know how to grow the company is through acquisitions and licensing parks overseas, because they are too incompetent to run their parks as proper businesses that can stand on their own legs.

Also I think CF's execs and board will consider this deal because the top brass at SF and CF, as well as their shareholders, can line their own pockets by having a bigger company and basically zero competition.

However I don't think it will happen because Cedar Fair is doing pretty well and Six Flags has a long history of shady business practices, financial issues, operational issues, management changes, etc. This is a classic example of something that would look good to Wall Street on paper but would probably turn out to be a big disaster. Cedar Fair's management is pretty experienced and this is like doing business with snakes I think ultimately they will make the right decision and not go through with this.

October 2, 2019 at 2:17 PM

Mmm...nope. Unnamed sources and no details. Actually the source is probably a shareholder.

Six Flags struggles to maintain what they already have, and it was overexpansion that almost killed the company not too long ago. A shorter reach might be the opposite...Cedar Fair taking over Six Flags. Better management, higher standards, and historically a good stock market performance.

I maintain though that monopoly puts a ceiling on progress. Competition
is important because it forces the bar to continually be raised. Consolidation, especially in the entertainment industry...lowers quality, variety, and creativity. The music industry and radio are prime examples.

October 2, 2019 at 3:52 PM

Let's sum it up like this:
Which park would you rather go to-- Six Flags in Atlanta or Carowinds in Charlotte?

Just when we were starting to see the "theme" being put back into the Cedar Fair parks... this deal would be a disaster to the industry.

October 2, 2019 at 5:30 PM

If I'm making up a deal just for the heck of it, it'd be FUN buying SeaWorld, then selling KD to SIX in a subsequent deal.

We need something like ESPN's NBA Trade Machine for this.

October 2, 2019 at 7:05 PM

/\ I like SFOG better than Carowinds (though that certainly does not mean I want SF to buy CF lol)

October 2, 2019 at 7:17 PM

They don't need to focus on that kind of stuff, they need to focus on getting stuff like their carousel organs repaired and sent to people like me who need experience/ a portfolio to get good in the field, going from the worst in kings Dominion to the mediocre 153 in dorney that hasn't been maintained properly since its 2015 rebuild.

October 2, 2019 at 9:39 PM

This is an intriguing idea. It's not one I particularly like, nor is it one I think has even a slight chance of happening, but it is one that would have interesting results. There are pros and cons to both Six Flags and Cedar Fair, so if the two companies got together and kept the good in each while discarding the bad, perhaps the US could have regional parks that rival those found in Europe.

Realistically, the most I could see happening is Six Flags making an offer to purchase a couple Cedar Fair properties. Dorney Park is the most obvious due to the dominance of Six Flags in the northeast, but I could also see reasons they might be interested in Michigan's Adventure or Worlds of Fun as well.

October 3, 2019 at 10:25 AM

i've been visiting both chains for the last few years and hands-down CF runs their operations miles above SF. it's not even close. if this were to happen (and hopefully it won't), i would rather see CF buy SF and see those parks run like they did back in the day. but then there would be that whole competition thing and we'd have a whole new slew of Geauga Lakes and that wouldn't be good for the industry at all.

October 3, 2019 at 2:18 PM

@ AJ: Not sure Six Flags would ever consider Worlds of Fun as there is already a Six Flags in St. Louis, just 4 hours away from Kansas City. Cedar Fair has had WoF for sale for years, and I am hoping they will find an interested buyer soon. It's been 10 years since Prowler was build, and that was WoF's last significant improvement. I don't count the Steel Hawk because it was a hand-me-down from Knott's Berry Farm because it couldn't pass inspection in California. The Herschend Family's Silver Dollar City park in Branson has surpassed both WoF and SF St. Louis and is by far the region's best park.

October 4, 2019 at 2:20 AM

TwoBits, Six Flags's current strategy has been to acquire existing parks in markets where they already operate in order to increase membership sales. Worlds of Fun fits well with that strategy, as it is close enough to St. Louis that there will be some visitor overlap yet far enough away to attract its own customer base. I don't disagree with you about Silver Dollar City, as it is far better than either SFStL or WoF, but at the same time I don't think they really compete with each other. SDC is more of a tourist park while the other two are locals' parks, so that likely won't have any affect on what happens elsewhere in the region.

October 4, 2019 at 1:07 PM

Updated with link to story about Cedar Fair rejecting the offer.

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