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.

Saturday, December 19, 2009 11:49 PM

I just don't get how you can make that distinction. If you only do 50% of your job right and have to sell because of it, that doesn't give them a free pass to be called successful. I mean, if I'm in school and I get A's in math and F's in English, I don't graduate.

Sunday, December 20, 2009 12:20 PM

No, but you might make a decent accountant---you just wouldn't be allowed to talk to anyone.

Edited: here's yet another way to think about it, assuming there are no short term changes in personnel. Effectively, current management is being moved from doing one job well and one job poorly to just the one job they do well. Unless Apollo thinks they can find people who are better at the "tactical" job, they may as well keep the folks they have. You don't have to be good at everything to be good at something, and if there is something you are good at, you may as well do that thing to add value.

Last edited by Brian Noble, Sunday, December 20, 2009 12:27 PM
Sunday, December 20, 2009 1:19 PM

That's a stretch to me. If you tank your company, requiring it to be sold and leaving your investors high and dry, you don't belong in the job. I don't see any justification otherwise.

Sunday, December 20, 2009 3:01 PM

That's because you're among the high and dry, I suspect.

Sunday, December 20, 2009 4:17 PM

So are you suggesting that it's OK to reward failure? That's the only thing I can get out of what you're saying, unless we have different definitions of failure.

Sunday, December 20, 2009 5:00 PM

No, I am saying that someone can be good at some facets of a job, and poor at others, and if their job can redefined to be more focused on the parts they are good at, keeping them could have value.

Success and failure is not binary all-or-nothing---you can be good at some things, and bad at others. A world-class javelin thrower might be a horrible decathalete. That doesn't mean you throw them off the track & field team. It means you don't enter them in the decathalon.

Likewise, Cedar Fair knows how to run individual theme parks at a profit. What they can't do---or perhaps what they forgot how to do---is manage expansion. Well, expansion is no longer a worry, because Apollo won't be looking to expand. But, if you happen to own a bunch of theme parks, and you need someone to run them profitably---squeezing profits, cutting costs, managing that clock-watching labor force, nepotism and all---well, Kinzel might just be your guy.

Sunday, December 20, 2009 5:44 PM

I'm with Jeff. Kinzel's got to go. I believe that he is responsible for CF's current financial situation, so he is responsible for the chain being sold, and at a loss to many shareholders. He failed, so why keep a failure around to make the same decisions for the new owners?

Sunday, December 20, 2009 5:58 PM

But Apollo doesn't give two hoots about the shareholders or how they got screwed. Apollo isn't interested in any sense of cosmic justice. Apollo only needs to run a colletion of amusement parks and other properties such that the revenue exceeds the expenses of day-to-day operations. And I haven't heard anyone claim that Cedar Fair's current management can't do that.

Where they failed is in over-extending themselves and growing too quickly. That's particularly ironic given CF's history of growing individual parks slowly, investing capital only when the park demonstrates a need for it.

Sunday, December 20, 2009 11:22 PM

I agree that Apollo doesn't care about the unitholders at all. They're looking to buy the company for as low a price as possible. But on the other hand, where do Kinzel, Crage, and Kwiatkowski get off talking like they're acting in the unitholders' best interest, which at least two of them are employed to do?

I don't know that all of the company's problems can be attributed to the purchase of the Paramount parks. What would that have to do with the fact that per caps have basically remained flat for several years? Apollo is looking to make money, and make more money each year after, not have revenues remain flat. I wouldn't say with certainty that Kinzel is irreplacable or that nobody else could run the company.

Monday, December 21, 2009 12:41 AM

At this point I expect that Apollo has done a fair amount of diligence and will continue to do more diligence as to what has worked well and that which hasn't. And I would expect they will want to build on the things that have worked and change the things that haven't. Personnel/management decisions will follow.

Monday, December 21, 2009 2:02 AM

Brian Noble said:
No, I am saying that someone can be good at some facets of a job, and poor at others, and if their job can redefined to be more focused on the parts they are good at, keeping them could have value.

I suppose, but hiring someone else entirely who's good at as much as possible still seems like the better option to me.

Monday, December 21, 2009 6:12 AM

Jeff said:
So are you suggesting that it's OK to reward failure?

Isn't that what they've been doing on Wall Street for the last several years? :)

Monday, December 21, 2009 9:30 AM

I suppose, but hiring someone else entirely who's good at as much as possible still seems like the better option to me.

No argument here. And, Apollo might yet do that. They've got enough cash to buy out current management if they think they can get someone better at the job. But, the space of people who are *known* to be better might not be that large, and there's already enough change to be disruptive.

The other thing that leads me to believe there will be few changes: Apollo isn't in this for the long haul. Apollo's investors aren't looking to invest in long-term value companies---this isn't Berkshire Hathaway. These guys are looking for more like venture-capital returns, by buying distressed companies at fire-sale prices with a promise of a short turnaround. When the turnaround happens, you spin it back out in a new IPO and pocket a nice profit.

Monday, December 21, 2009 11:17 AM

I will remain 'cautiously optimistic' on the situation until I see how Apollo does with the parks.

Monday, December 21, 2009 4:22 PM

Buy it, turn it around, spit it out in a new IPO.... that is what I was also thinking could be the motive for Apollo to buy Cedar Fair. This could be more of a way for CF to refinance than anything else. The sale price may seem low, but the company could be spiralling down to a bankruptcy if the sale does not happen, which in retrospect would make price per share in the Apollo sale seem lucrative.

This entire mess has to be Kinzel's responsibility. The Paramount purchase was so mismanaged it turned into a disaster. If the Apollo sale goes through and they clean house and get people in there that treat employees with respect and have fresh ideas on how to grow the parks, the new CF may well be a better company.

Monday, December 21, 2009 11:53 PM

One thing is driving me nuts in this whole thing; I very vividly remember reading/hearing from either a press release or a news article that in 2006 at the time of or shortly after the closing of the Paramount deal that instead of retiring in 2007 (at the end of the season?) the Board had agreed to a 6 year contract extension for Kinzel. However I have looked through my investor relations packets for 2006 which have most all of the Paramount related company pressers and I can't find the information!

The news of him leaving after/before 2013 would appear to substantiate that, although I took the 6 year extension as being from 2006, not 2007. Of course the 2007 +6 makes more sense now that I think about it, since that was the original slated retirement year.

Am I just that crazy/delusional, or does anyone else remember the 6 year contract extension?

Monday, December 21, 2009 11:57 PM

^ I recall his contract being extended to the end of the 2012 season.

Tuesday, December 22, 2009 8:53 AM

Cedar Fair's top officer signs pact to stay to 2012

Tuesday, December 22, 2009 9:00 AM

Compare this buyout to the life of a fish at sea. It starts out the size of a minnow, namely Coney Island, Cincinnati, Ohio ... Not the Coney in NY. So the Coney Island minnow swims along enjoying itself. Later, as Coney minnow gets bigger it gets eaten by Taft Broadcasting Corporation. Taft sees a bigger pond out near Mason, Ohio and decides to close Coney and build a shark called Kings Island. Of course the shark Kings Island is eventually eaten by the killer Whale Paramount. But as thing go in the ocean, along comes a Whale Cedar Fair with a big appetite and gobbles up all 5 Paramount Parks and puts it on the credit card. So the payments get a little too deep and the bigger fish Apollo Global Management Group comes along and scarfs down Cedar Fair and all its parks. Gobble, gobble gobble, sort of like Pac Man. That's business or life in the ocean.

Tuesday, December 22, 2009 9:17 AM

'Cedar Fair purchase is hardly a done deal'


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