Cedar Fair tells Six Flags 'no thanks' to proposed deal

October 4, 2019, 12:42 PM · Well, it appears that the Six Flags offer to buy Cedar Fair was real... but it's still not happening.

Reuters reports that Cedar Fair has rejected what it calls a $4 billion cash-and-stock offer to obtain the theme park chain.

The bid worked out to about $70 a share, which was a substantial increase over the $58 a share that Cedar Fair [FUN] was trading at before news of the proposed deal broke. But that wasn't enough for Cedar Fair's board.

Basically, Cedar Fair's corporate structure is more favorable to shareholders when it comes to paying taxes, and they would have lost that tax advantage if their shares became ones in Six Flags. The Cedar Fair board believes that advantage is worth more than the premium Six Flags offered for the FUN shares.

But none of that gets to the outrage that many theme park fans felt when they heard about the deal. Though they both run regional amusement parks, Cedar Fair and Six Flags offer different experiences, and fans like having that choice. Part of that difference is Cedar Fair not homogenizing its parks to the extent that Six Flags does, and Cedar Fair fans did not want to see parks such as Knott's Berry Farm and Cedar Point lose their unique flavors.

Six Flags' business model right now focuses sharply on the sale of memberships, and the chain has been looking to expand the number of parks that it operates in order to grow that membership base. It's a chain-first approach, while Cedar Fair's is more park-first. Heck, has anyone outside the fan community ever even heard of "Cedar Fair?" Most fans of Cedar Fair parks just know their own park's brand and might not even know that it is part of a chain.

All that said, Six Flags did include a cash component in its takeover bid. If Six Flags really needs to acquire more parks and can't get the entire Cedar Fair chain, it's not inconceivable that Cedar Fair might listen to a cash offer for some of its individual parks, especially smaller parks with weaker brands in locations where Six Flags needs presence.

In corporate mergers and acquisitions, rejected offers often lead to new offers, sometimes from other parties. We will see if this bid turns out to be a one-shot-and-nothing deal... or the start of a new round of M&A bids in the theme park business.

Replies (7)

October 4, 2019 at 12:55 PM

Perspective: Disneyland's Star Wars: Galaxy's Edge is reported to have cost $1 billion. Tokyo Disney is spending $2.4 billion on its new Fantasy Springs land in DisneySea. Universal is said to be spending in excess of $6 billion on Universal Studios Beijing.

And Six Flags accounted that the entire Cedar Fair chain, including Knott's, Cedar Point, Canada's Wonderland, etc., was worth just $4 billion. And that was a premium above Cedar Fair's market cap.

That's the difference between the worlds that Disney and Universal occupy versus everyone else in this business.

October 4, 2019 at 1:05 PM

Another perspective is how much it costs to build a new theme park from scratch these days. Let's face it, even if you wanted to build a brand new park on cheap land, you'd be looking at a price tag close to $500 million just to create a minimal regional draw and that doesn't even include the capital required to operate and maintain the park. People complained that the $400 million number cited to build Hard Rock Park was low back in 2007, so you'd have to think if Six Flags wanted to create a new park from scratch in today's climate, they'd have to invest nearly twice that much assuming they don't receive some windfall from a savvy real estate transaction.

That $4 billion number seems like a low-ball offer just for the top parks in the chain (Knott's, Cedar Point, Carrowinds, and Canada's Wonderland), let alone the rest of Cedar Fair's portfolio. Cedar Fair could probably liquidate all of their assets (including licensing contracts and IP rights - remember they own Pro-Slide now too) for more than $4 billion, so it seems as though Six Flags saw their major competitor being undervalued, and attempted to give them an offer they couldn't refuse. Or perhaps this move was more of an attention grabber for analysts to understand the true value of theme parks within the industry, eventually leading to all themed entertainment stocks to shift up.

October 4, 2019 at 1:10 PM

I'd never trade my years working for Six Flags in the late 1980's and early 1990's but the brand is not what it was. Cedar Fair seems to be run much more responsibly and with a greater emphasis on quality. Not saying it's perfect either, but on the surface and from the outside - it looks like a better run coropration. I'm glad this is not happening. I'd love it if Six Flags would turn around and invest that amont of money into its current stable of parks and improve themselves rather than just trying to gobble up more gates.

October 4, 2019 at 2:04 PM

And all of northern Ohio breathes a huge sigh of relief!

October 4, 2019 at 7:19 PM

As a shareholder in Cedar Fair, I would have liked to hace a vote on the $70.00 a share offer. That said I think they should publicly say they are willing to listen to other offers because the Board has done nothing to increase the value of the company.

October 5, 2019 at 1:39 AM

They just bought two waterparks, built a sports park in Sandusky that undoubtedly drives attendance and hotel revenue at Cedar Point, and just bought a competing campground in Sandusky as well. I'm not even counting all of the new coasters they have built over the past few years.

I mean what else do you expect an amusement park operator do? Expand into the barbershop business? (yes that comment was intended)

October 7, 2019 at 11:05 AM

I would hate to see Six Flags take over any Cedar Fair parks for some of the aforementioned reasons, the primary one being the number of rides which are duplicative of those at other parks. The only possible advantage to be gained by the consumer if a Cedar Fair park were to be obtained by Six Flags is that the price of a season pass would decline dramatically. This year I have a Six Flags season pass which cost me $86 and a Cedar Fair platinum pass which cost me $195. Considering that by the end of the year I will have visited Six Flags Great Adventure multiple times and both Texas Six Flags parks once, this is a heck of a good deal. This year I've visited only 3 Cedar Fair parks (Canada's Wonderland, Carowinds & Dorney) and don't feel as if I got my money's worth. And while I agree with Rob that Cedar Fair parks tend to be better run, I don't think that they're so much better that such a disparity in pricing is warranted. As Robert mentioned, Six Flags' current strategy is to sell memberships and while they do afford extra perks, they're not as cost effective. No thanks. A pass which gets me into any Six Flags park and includes parking (which is now up to or over $25) is more than sufficient.

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