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.Tweet
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