Six Flags Looks to Prevent a Hostile Takeover

April 1, 2020, 12:14 PM · Six Flags has enacted a "poison pill" strategy in attempt to prevent a hostile takeover of the amusement park company.

Technically called a "Stockholder Rights Plan," the strategy allows shareholders to buy more shares of the company at a discount if any one shareholder acquires more than 10 percent ownership of the company. The idea is to dilute the value of the hostile shareholder's stake in the company, making it more expensive for them to take over the company without the current board of directors' approval.

Plenty of companies have used this strategy in the past, so Six Flags is hardly unusual here. But the company's dropping stock price has made it a potential target for a hostile takeover. We wrote about theme park companies' stock prices last month, and Six Flags' position has gotten worse since then, now trading at under $12 a share as of this post.

Six Flags now has a market capitalization under $1 billion. To put that value into perspective, if you were to build 1,000 million-dollar homes on the land now occupied by Six Flags Magic Mountain, that residential development would be worth more than the entire Six Flags chain right now.

Middle-class tract homes now routinely sell for a million bucks each in the Los Angeles area, so this scenario isn't too far a stretch. It also illustrates the big problem for theme park fans should someone launch a hostile takeover of Six Flags. A new owner might not be looking to get into the theme park business. It could just target Six Flags for the real estate value of its park properties, selling off or scrapping rides as it clears the land for redevelopment.

Six Flags management doesn't want that to happen, so that's why it is using this defense strategy in an attempt to make it harder for some outside party to pick the company apart.

Both Cedar Fair and SeaWorld also have market caps lower than Six Flags at this point, so none of the top three independent theme park companies in the United States is enjoying a great financial position right now. The best thing going for these companies might be that this economic downturn is no longer limited to the travel industry, meaning that many other parties that might have had the resources to make a takeover bid have problems of their own to deal with right now.

But if anyone is going to try to take over Six Flags, the company's management has made clear that it will not go down without a fight.

Replies (7)

April 1, 2020 at 1:38 PM

Theres a reason nobody inside the industry wanted this job, I actually kind of feel bad for Mike Spanos.

April 1, 2020 at 2:45 PM

Hey, at least Six Flags has someone in charge of its theme parks right now. (Looking at you, Disney.)

April 1, 2020 at 3:09 PM

@the__man, they're in no different financial position than Cedar Fair or SeaWorld. All 3 have seen almost equal stock price declines and Six Flags has equal market cap to Cedar Fair and greater market cap than SeaWorld. You could even argue that they are being the most proactive to protect their existence and assets. You can say a lot about them compared to other park chains on things like operations and net spend but they aren't in, and haven't been, in a "worse" position than the others

April 2, 2020 at 10:37 AM

Cedar Fair is better positioned than Six Flags. Yes Six Flags is a bigger company because they have more parks and parks in NY, LA, Chicago, Dallas, and Atlanta which is a big deal (and a major reason it is so attractive to an outside buyer) but there's one major stigma Six Flags faces and that's that their parks have a long reputation now of being poorly maintained, poorly operated, poor customer service, dumps.

This is evident in the fact that CF has slowly raised their admission prices whereas Six Flags has not. Six Flags annual pass prices are the same as they were 20 years ago and that's not even including inflation. SFOG is selling their season passes right now for $70 and that includes parking and obviously all other SF parks. The equivalent pass for Cedar Fair is $220 and that's for less parks with smaller markets. The fact that SF has not been able to successfully raise their season pass prices in decades, even though they have prime real estate in major markets many of which have basically zero competition, illustrates that there is still something majorly wrong.

And get this, even though they give away season passes their season pass sales were still way down in 2019. Once again this is because their parks are dumps and poorly maintained/operated. I was a season pass holder in 2018 and went to many parks and decided after visiting a few times in 2018 that I had no interest in going to any SF park again in a long time and didn't buy one in 2019. I have been a "theme park guy" for over 25 years and I was just done...even though it's cheap, to me Six Flags parks had just become a waste of time. Theme parks are supposed to be fun and when the frustration outweighs the fun its not worth the time.

I believe the reason SF made an offer to buy out CF was a desperation "hail mary" type attempt to bail themselves out through consolidation. They were hoping Richard Zimmerman would take the bait because he could get himself a higher salary by running a way bigger company. $4 billion for the entire company was a joke CF's board probably didn't even consider that for 5 seconds before throwing it out.

April 2, 2020 at 3:07 PM

Buying the company for the land rights is an interesting idea, but ultimately not very practical. Magic Mountain has plenty of available land surrounding it. Cost of purchase, demolition, disposal, not to mention public outcry would far exceed any value that could be squeezed out.
But the fact still remains, the share price is low and the company is ripe for picking. Theme park operator consolidation would be a more likely scenario.
I'm hoping for FUNSEAS!

April 3, 2020 at 12:27 AM

I remember when Mark Shapiro shopped Magic Mountain and nobody wanted to buy it. The "roller coaster capital of the world", right in the middle of one of the biggest markets in the country, with year round great weather, and nobody wanted to buy it.

That right there tells you everything you need to know lol.

April 3, 2020 at 3:47 AM

Well the problem with SF is that they own adult parks. It's not disney or CF where they cater to everyone. SF has a small kids areas and no real "beginner coasters" for kids getting into coasters. I think if they added alcohol and allowed open drinking like universal they would do better. Furthermore, as mentioned above, when SFMM was up for sell no one wanted it because its not near the coast. Most of the population of CA is near the coast and MM is inland with no direct major highways/freeways (ex I-5) unlike disney and knotts. SF has worked on some of there more valuable parks but its not enough to compete against a family park. DCA is a prime example.

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