Posted Monday, December 21, 2009 11:50 AM | Contributed by Jeff
Cedar Fair executives and Apollo managers have not persuaded analyst Jeffrey Thomison of Hilliard Lyons, a financial consulting firm in Louisville, Ky. He's not convinced they can reach the two-thirds threshold to make the deal go through.
Read more from The Sandusky Register.
Ha! Unit holders should absolutely vote NO. This is yet another bad business decision perpetuated by Kinzel & Co. because they put themselves in a financial jam. There should be a unit holder revolt, not only against this low-balled deal but also to remove the ENTIRE board of directors as well as the CEO, COO and CFO.
After all the commentary on the previous subjects, and discussing this with other industry folk, I tend to agree with Jeff, and the rest of the unit-holders that are unhappy with the price.
Regardless of how many shares you own, 5, 10, 100, or 500, odds are you bought them at least 3 years ago, and the price was much higher. The stock will not climb back to $25 or higher anytime soon, but the big question for Apollo and the Board is ....How did you come to this price?
Kinzel himself can exercise options on over 1 million shares, so why don't they try to get more. I can forsee plenty of negative PR brewing here, so why don't pump up the offer to, I am throwing a number out here....$17.50-$19.00 a share. That is an attainable figure within 24 months or so after a good operating season, debt reduction, and continued real estate sales. Just my opinion.
Apollo is not a bad company. Not a great one either. Blackstone has a better knowledge of the seasonal park business, and now will have a lot more. If they paid a premium for Busch Entertainment, why can't Apollo pay for Cedar Fair?
I just compare this to the Paramount deal, subtract a sizable portion for the market downturn, and then guesstimate that it's still about 150M-200M short...
There are a lot of investments right now worth less than they were at least 3 years ago. Same is true of houses. Doesn't mean the current market price is too low.
Its also easy to look back with hindsight and say that CF should have sold 2 summers ago. Had they sold then and the market picked up and the debt markets relaxed, people would now be saying CF sold too early.
And the value of CF units would increase if the economy recovers in 2010. But it isn't clear that will happen. And as for the flagship park, recoveries have historically lagged behind the rest of the country. So the upturn that many want to see may or may not be there. And if no sale happens and the economy doesn't recover in 2010, I suspect there would be a lot of folks complaining that CF had no contingency for a slow economic recovery.
Unitholders will have the vote to determine which way they want to proceed in the face of uncertainty. If more than 1/3rd of them believe there is more value to be found either in holding the investment longer or selling to someone else, the sale to Apollo won't go forward. We shall see.
The market price for the units won't increase until the following three issues change:
1. The debt coming due in 2012 gets pushed out so that CF can service it.
2. The distribution is reinstated.
3. The parks see growth in both turnstyle clicks and per cap spending.
Of course, all three are related. CF has never been a growth stock. Taking away the value part of the investment beat it down almost as much as the general economic conditions over the past two years. As such, it's a different investment now, and one that is largely undervalued compared to what the company, market, and units were just two years ago.
Buying the Paramount parks was a good decision when they did it. The credit markets were loose, and the economies of scale very attractive. I still think that if they can wait out the current conditions for credit, and if they can refinance this debt long term, then they will be able to bring the stock price back up and to restart the distributions. But, we'll never know this if the unit holders approve this sale. I would much rather see them dilute the current units & do a shelf offering to raise some $$$. I like my long term odds on the company.
You must be logged in to post