Cedar Fair agrees to be acquired by an affiliate of Apollo Global Management

Posted Wednesday, December 16, 2009 10:25 PM | Contributed by Jeff

[Ed. note: The following in a partial, but unedited press release. -J]

SANDUSKY, OHIO, December 16, 2009 -- Cedar Fair, L.P. (NYSE: FUN), a leader in regional amusement parks, water parks and active entertainment, announced today that it has entered into a definitive merger agreement to be acquired by an affiliate of Apollo Global Management, a leading global alternative asset manager.

Under the terms of the agreement, Cedar Fair unitholders will receive $11.50 in cash for each Cedar Fair limited partnership unit that they hold, representing a 43% premium over Cedar Fair’s volume weighted average closing unit price over the past 30 days and a 28% premium over the closing unit price on December 15, 2009. The transaction is valued at approximately $2.4 billion, including the refinancing of the Company’s outstanding indebtedness. Affiliates of J.P. Morgan, B of A Merrill Lynch, Barclays Capital Inc., UBS Investment Bank and KeyBanc Capital Markets have provided an aggregate $1.95 billion financing commitment in support of the transaction.

The board of directors of Cedar Fair has unanimously approved the merger agreement and has resolved to recommend that Cedar Fair limited partnership unitholders adopt the agreement. Cedar Fair’s chairman, president and chief executive officer, Dick Kinzel, said, “We have considered a wide range of strategic alternatives over the past several years. After considering these strategic alternatives, we have concluded that the transaction with Apollo is in the best interest of our unitholders.”

“This transaction allows Cedar Fair unitholders to realize significant value from their investment in our Company over recent trading levels,” added lead director, Michael Kwiatkowski. “Apollo has a strong track record of growing businesses, and its desire to add Cedar Fair to its portfolio serves as a testament to our solid business model and the talent of our people.”

Aaron Stone, a Senior Partner at Apollo, said, “We are extremely pleased to be acquiring this premier amusement park operator. We look forward to partnering with Cedar Fair’s management team and employees to build on the many strengths of the Company. We are firmly committed to Cedar Fair’s continued growth as an industry leading amusement park operator.”

Transaction Details

The merger is conditioned upon, among other things, the approval of holders of two-thirds of Cedar Fair’s outstanding units, the receipt of regulatory approvals and other closing conditions. Assuming the satisfaction of these conditions, the transaction is expected to close by the beginning of the second quarter of 2010. The merger agreement does not include a financing condition. Upon completion of the merger, Cedar Fair will become a private company, wholly-owned by an affiliate of Apollo Global Management.

Under the terms of the merger agreement, Cedar Fair may solicit alternative proposals from third parties for 40 days and will consider any such proposals. There can be no assurance that the solicitation of such proposals will result in an alternative transaction. In addition, Cedar Fair may, at any time, subject to the terms of the merger agreement, respond to unsolicited proposals.

Rothschild Inc. and Guggenheim Securities, LLC are the Company’s financial advisors, and Weil, Gotshal & Manges LLP and Squire, Sanders & Dempsey are its legal advisors. Wachtell, Lipton, Rosen & Katz and O’Melveny & Myers LLP acted as legal advisors and B of A Merrill Lynch, J.P. Morgan, Barclays Capital Inc., and UBS Investment Bank acted as financial advisors to Apollo Global Management in connection with the transaction.

About Cedar Fair

Cedar Fair is a publicly traded partnership headquartered in Sandusky, Ohio, and one of the largest regional amusement-resort operators in the world. The Company owns and operates 11 amusement parks, six outdoor water parks, one indoor water park and five hotels. Amusement parks in the Company’s northern region include two in Ohio: Cedar Point, consistently voted “Best Amusement Park in the World” in Amusement Today polls and Kings Island; as well as Canada’s Wonderland, near Toronto; Dorney Park, PA; Valleyfair, MN; and Michigan’s Adventure, MI. In the southern region are Kings Dominion, VA; Carowinds, NC; and Worlds of Fun, MO. Western parks in California include: Knott’s Berry Farm; California’s Great America; and Gilroy Gardens, which is managed under contract.

About Apollo Global Management

Apollo is a leading global alternative asset manager with offices in New York, Los Angeles, London, Singapore, Frankfort and Mumbai. Apollo had assets under management of over $51 billion as of September 30, 2009, in private equity, credit-oriented capital markets and real estate invested across a core group of nine industries where Apollo has considerable knowledge and resources.

Read the entire press release from Cedar Fair.

Thursday, December 17, 2009 12:18 PM

No, the price today means that there is an interest in the company from the buyout buzz.

It's more than interest. The price is known, and CF's Board has agreed to the terms. The only question left is (a) does anyone out there want to pay more, or (b) will the unitholders vote down the acquisition.

If (a) is true, that would tend to push the price above the current $11.50 offer. If (b) is true, that means the deal folds, and you'd expect to see the share price settle back down towards the pre-offer valuation. If it hovers right below $11.50, though, it means the market thinks it is sealed, based on what everyone knows right now.

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Thursday, December 17, 2009 12:37 PM

Not only will people lose on their original investment, those who reinvested their dividends will lose. Only 2 payouts in the past 5-6 years I've owned units were at a price below this $11.50 figure. The only good thing is that if you get to itemize on your tax return, you can take the capital loss and maybe reduce your bill or increase your return.

The MSN site Jeff linked to reported institutional holdings as of 9/30. I wonder if that amount is even lower now, since a lot of stock was dumped in November when the dividend was suspended and the price went from 12-13 down below 7.

In any event. the result might be 55 million to 250, but my shares are voting against it.

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Thursday, December 17, 2009 12:43 PM

Unless they changed the rules recently, I believe you can only deduct capital losses to the extent of capital gains (offsetting them) plus $3000.

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Thursday, December 17, 2009 12:48 PM

But many other stocks are also depressed, and presumably investors who are liquidated out of FUN will just move into one of them, getting those at a discount as well---comparing against the market high doesn't make sense unless you're going to just leave it in cash.

It would be interesting to compare the return realized by a FUN investor who reinvested all dividends, and sold at 11.50, to the return of someone who invested the same amount in an S&P 500 index fund over the same period. If they are comparable, then the FUN investor is not "losing".

Last edited by Brian Noble, Thursday, December 17, 2009 12:49 PM
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Thursday, December 17, 2009 1:05 PM

Hold tight kids...the FUN is just starting!

http://finance.yahoo.com/news/Levi-Korsinsky-LLP-bw-3375526993.html?x=0

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Thursday, December 17, 2009 1:15 PM

While they may only have 16.5 million coming due in the next 12 months I believe there was a more significant debt payment coming up in 24-36 months. With the market the way it is right now and no significant signs of improvement then it is incumbent on Kinzel to keep all options on the table. Someone may be willing to buy today but may not be willing to buy 2 years from now.

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Thursday, December 17, 2009 1:28 PM

Hold tight kids...the FUN is just starting!

These fiduciary duty cases are always risky. To defend, the Board has to basically say that the company is doomed, and this is their only hope of getting any return at all. Even if the lawsuit prevails, you still have hours of deposition and testimony---by senior management---stating that the company is doomed. That doesn't encourage future investors.

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Thursday, December 17, 2009 2:10 PM

wahoo skipper said:
While they may only have 16.5 million coming due in the next 12 months I believe there was a more significant debt payment coming up in 24-36 months. With the market the way it is right now and no significant signs of improvement then it is incumbent on Kinzel to keep all options on the table. Someone may be willing to buy today but may not be willing to buy 2 years from now.

They were able to push back $900 million two years to 2014, so the balance of about $700 million comes due in 2012. Their filing last week to offer up to $750 in secured bonds looks to be the way they intended to push that amount out.

Obviously, the renegotiation of the debt with the permission to offer secured bonds to be used for debt retirement was being done at least partially concurrent to the talks with Apollo. So, it's curious to see them "throw in the towel" without even dipping their toes in the bond pool that they just created.

We don't know the entire specifics of the debt agreements, but I would speculate that two years is a long time and the opportunities to refinance your debt in that time has to be pretty good, even with no guarantees that the economy & the credit markets will fully recover. This (potential) sale to Apollo simply seems so drastic.

I simply don't see the urgency to give away the long term future of this company.

/m

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Thursday, December 17, 2009 2:18 PM

Does anyone know if Kinzel plans (planned) to be at the helm in two years? If not, I'm wondering if this is his pitch to try and "save" the company before retirement. Maybe the bond pool doesn't react well to Kinzel stepping down...and that is his concern.

The Register is reporting that the headquarters will stay in Sandusky. Wow...glad they are on top of the obvious. But, just because the headquarters will stay doesn't mean the chairs will be occupied by the same folks should this go through.

Cedar Fair itself is a good example of what happens when there is a new boss in town. Lot's of former Paramount execs are distant memories at their parks.

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Thursday, December 17, 2009 2:31 PM

True, although it's worth noting that there is a difference between a "merger" and an "acquisition". Cedar Fair bought Paramount Parks in a merger. Apollo is (potentially) acquiring Cedar Fair. They are not looking to combine Cedar Fair with an existing operational unit. With this kind of an acquisition, the biggest change is that the *CEO* gets a new boss.

--Dave Althoff, Jr.

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Thursday, December 17, 2009 3:01 PM

How was that a merger? CBS got paid for the company and Cedar Fair assumed the cost.

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Thursday, December 17, 2009 3:13 PM

In terms of a cash out merger and a stock sale, there isn't much of a difference in the end result. You typically go the merger route when the seller has a lot of shareholders because otherwise you need to get signatures of all of the shareholders (and you have a problem with dissenting shareholders). With the merger, the board and the requisite number of shareholders approve, CF and an acquisition company formed by Apollo merge and shares of CF get paid the cash price/share and the Apollo ownership interests continue in the equity of the surviving entity.

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Thursday, December 17, 2009 3:53 PM

Let me say it first: "Please God let them reopen Geauga Lake!!!!" (I know... won't happen)

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Thursday, December 17, 2009 4:40 PM

Jeff: I'm speaking outside the financial language (and probably out of turn). Cedar Fair gave CBS an assload of money, and Paramount Parks *became part of* Cedar Fair. Paramount Parks were merged into the Cedar Fair operation.

As I understand it, Apollo is simply acquiring all of Cedar Fair, as-is, where-is. Dick Kinzel gets a new boss, but other than that, not much necessarily changes. At least at the outset.

In the business world the language is different, but I am not a businessman. :)

--Dave Althoff, Jr.

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Thursday, December 17, 2009 5:20 PM

^I still say the PARKS would have been better off if Paramount had taken over CF....but that's not even "business". ;) :)

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Thursday, December 17, 2009 8:55 PM

Ship sailed, milk spilled 'gator.

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Thursday, December 17, 2009 9:28 PM

Dick says he isn't going anywhere; I am sure some unit holders would like a chance to vote on that as part of the sale vote :)

http://www.cleveland.com/business/index.ssf/2009/12/cedar_fair.html

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Thursday, December 17, 2009 11:14 PM

Well if I remember correctly, his contract is not up until 2011 so I could see him staying until then.

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Friday, December 18, 2009 1:28 AM

"For our employees and our customers, nothing is going to change," Kinzel said.

I'm sure everyone who loves overpriced tasteless grease laden "food" is glad to hear that.

Kinzel might want to stick around, but doesn't Apollo want to make money on the parks? Why should they keep the current management who didn't seem to have much of a clue how to increase revenue and per cap expenditures? Think the Apollo folks will be wowed by the idea of 25 cent cotton candy?

Dick can say all he wants that he believes this is in the best interest of the unitholders-- what, paying us a price lower than the units' price as recently as August? How is this doing us a favor? This is like Dick Kinzel burning your house down, then showing up with a truckload of scrap wood and telling everyone he's looking out for you.

How about paying us a 43% premium over the unit price on the day before you announced the dividend was going to be reduced back in the spring?

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Friday, December 18, 2009 9:57 AM

http://www.sanduskyregister.com/articles/2009/12/18/front/doc4b2a7e49a8ba5362096786.txt

Sorry if this has already been posted but Kinzel says he will be staying on until 2013. I remember when he was originally supposed to retire a few years back, I guess he doesn't like the golf courses in Sandusky.

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