Jana Partners again calls for Six Flags sale

PDXPointer:

Ever since the merger was announced, I have convinced that the overwhelming debt of Six Flags was going to swamp Cedar Fair.

It was not any more overwhelming than Cedar Fair's. Six Flags brought in around 2.5 billion, Cedar Fair around 2.2 billion.

But the difference is Cedar Fair parks were profitable, growing and generally well managed. With $300 million less debt on the balance sheet than SIX.

Six Flags parks were in a free fall financially (double digit revenue and margin declines), poorly managed and park infrastructure deteriorating.

MDOmnis:

They really need to figure out something creative, but low in capital expense to get people to show up for a couple years without big capital investments so they can pay down some debt.

That was called 2026.... how is that turning out?

Chicago07:

But the difference is Cedar Fair parks were profitable, growing and generally well managed. With $300 million less debt on the balance sheet than SIX.

I would agree that the lack of profitability and management were overwhelming, but not the debt, as the member I quoted was ascerting.

Entering the merger, Cedar Fair's EBITDA was a little higher than Six Flag's. Combined with the lower total debt, Cedar Fair's leverage ratio was lower than Six Flag's. Neither was good though. Like someone with a 500 FICO throwing shade on someone with 450.

In other words, tying two stones together to see if they'll float.

Agreed. Part of my point though on the profitability and margins was Cedar Fair was able to deliver higher EBITDA on 11 amusement parks, 4 separately gated water parks, plus their resort portfolio ... while Six Flags was delivering lower EBITDA, revenue and attendance on 15 amusement parks and 11 separately gated water parks. FUN had a smaller footprint but delivered stronger results.

That speaks to difference in quality of management and strategy, performance and overall park infrastructure of legacy Cedar Fair vs legacy Six Flags.

The ratio I always heard was Knotts was around 24% of revenue, CP was around 22%, CW like 18% and KI like 17, then divide the rest .

81% from four parks is crazy. I know they tried really hard and spent a lot of money to bring up Carrowinds and KD to that top level, I wonder why it failed, it’s certainly not due to a lack of potential customers.

Here is snippet from the Ouimet era “Fun Foward” decks. The pie format is a little tough to read, but while it shows the powerhouse parks do make up a big share, the rest were at least profitable.

At first glance it’s easy to see why they sold MIA, WoF, and VF. It still seems desperate to sell them off for so cheap if they were profitable though. lt might not be sexy, but add them up and you get a decent chunk of earnings. Problem with philosophy of we need major growth / earnings now is those parks would never provide that. At least they realized plopping down coasters early 2000s six flags style is not a solution to growth at these parks.

In the Ouimet era, they seemed more content keeping them knowing that if they operated them halfway decent you will get slow and steady contributions from them year over year. That is probably in contrast with many low tier legacy Six Flags parks which were not profitable at all.

Other interesting thing about this it shows how profitable the resort side of Cedar Point must be. It looks to have double the earnings of KI/ Wonderland despite similar attendance and gate prices. Then revenue looks similar to Knotts, but operating only half the year means less expense.

Biggest thing here was Dorney seemed to hold its own. If that’s still the case it might be safe from sale.

Don’t forget Knotts has a hotel too.

if they had needed a hotel..

Actually there was a time, where several of the CF parks could/should have invested in a hotel.

With the exception of KD (which is in desperate need of a decent lodging option at or near that exit), I think those opportunities have come and gone as other hotels have now been built “near enough” to the parks to have taken that advantage. I don’t think KD could support one but the skanky trucker motel options that are across the parking lot are just not acceptable options for me, and there is nothing else around. (Thus the selling off of excess land rather than developing a lodging option)

KI absolutely blew opportunities and let Great Wolf land on their doorstep, but they certainly could have developed the spots where the hotels by the former “The Beach” water park are. There is enough year round business at that exit that they could have made extra profit with the KI tie in.

However, as I said most of the parks have missed that opportunity. Magic Mountain certainly did from the former Six Flags side

Didn't they have some involvement in a hotel at Carowinds?

Agreed re: KI and KD - they had hotels that became run-down, and rather than remodel or replace them they just abandoned that revenue stream, which was dumb. A campground as well at KI, IIRC. And then there was the new campground that was branded for a year or two and then un-branded.

I suspect lack of available cash was part of the problem, but they'd surely have been better off delaying a roller coaster by a year and building a hotel instead. And I think it was probably Ouimet who said developing campgrounds was relatively cheap and a priority. Oh well ....

FUN owns and operates the Springhill Suites by Marriott at Carowinds.

The growth of the Fields Ertel exit south of KI is what killed the KI Inn (their old hotel). Yes, CF could have reinvested in the hotel but there were (and are) too many newer and cheaper options a few miles down the road.

We probably need Gonch to chime in, but my sense is that the hotel business is quite a bit harder than most of us realize. That's especially true if you don't have some sort of advantage that your competitors cannot overcome---like being the only operator of On-Point hotels, or a near monopoly of hotels within 15 minutes of a theme park at WDW.

I've got a couple nights booked at the Knotts hotel coming up this winter, but it looks like a pretty standard mid-scale business-class hotel (being generous), and that's after a top-to-bottom renovation. It's walking distance to the park entrance, but there are plenty of others close by.

And despite having that near-monopoly, the Mouse has been busy tearing down/converting parts of their hotels in Florida into timeshares. They haven't built a cash hotel building since the Coronado tower opened, and that's primarily in service to the convention business there. Before that? Art of Animation, which broke ground before 9/11. Lakeshore was originally announced as a a hotel/timeshare mix, but has since been converted to be all (or at least almost all) timeshare.