Cedar Fair and Six Flags announce equal merger
Posted
From the press release:
SANDUSKY, Ohio & ARLINGTON, Texas--(BUSINESS WIRE)-- Cedar Fair (NYSE: FUN) and Six Flags Entertainment Corporation (NYSE: SIX) today announced that they have entered into a definitive merger agreement to combine in a merger of equals transaction. The combined company, with a pro forma enterprise value of approximately $8 billion based on both companies’ debt and equity values as of October 31, 2023, will be a leading amusement park operator in the highly competitive leisure space with an expanded and diversified footprint, a more robust operating model and a strong revenue and cash flow generation profile.
Under the terms of the merger agreement, which has been unanimously approved by the Boards of Directors of both companies, Cedar Fair unitholders will receive one share of common stock in the new combined company for each unit owned, and Six Flags shareholders will receive 0.5800 (the “Six Flags Exchange Ratio”) shares of common stock in the new combined company for each share owned. Following the close of the transaction, Cedar Fair unitholders will own approximately 51.2%, and Six Flags shareholders will own approximately 48.8%, of the combined company’s fully diluted share capital on a pro forma basis. One business day prior to the close of the transaction, Six Flags will declare a special cash dividend composed of: (i) a fixed amount of $1.00 per outstanding Six Flags share, totaling approximately $85 million in the aggregate, plus, (ii) an amount per outstanding Six Flags share equal to (a) the aggregate per unit distributions declared or paid by Cedar Fair to unitholders with a record date following today’s date and prior to the close of the transaction, multiplied by (b) the Six Flags Exchange Ratio, which special dividend will be payable to Six Flags shareholders of record as of one business day prior to the close of the transaction, contingent on the closing of the transaction.
“Our merger with Six Flags will bring together two of North America’s iconic amusement park companies to establish a highly diversified footprint and a more robust operating model to enhance park offerings and performance,” said Richard Zimmerman, President and Chief Executive Officer of Cedar Fair. “Together, we will have an expanded and complementary portfolio of attractive assets and intellectual property to deliver engaging entertainment experiences for guests. The combination also creates an enhanced financial profile with strong cash flow generation to accelerate investments in our parks to delight our guests, driving increased levels of demand and in-park value and spending. I have great respect for the Six Flags team and look forward to joining forces as we embark on this next chapter together.”
“The combination of Six Flags and Cedar Fair will redefine our guests’ amusement park experience as we combine the best of both companies,” added Selim Bassoul, President and Chief Executive Officer of Six Flags. “Six Flags and Cedar Fair share a strong cultural alignment, operating philosophy, and steadfast commitment to providing consumers with thrilling experiences. By combining our operational models and technology platforms, we expect to accelerate our transformation activities and unlock new potential for our parks. We are excited to unite the Cedar Fair and Six Flags teams to capitalize on the tremendous growth opportunities and operational efficiencies of our combined platform for the benefit of our guests, shareholders, employees, and other stakeholders.”
Compelling Strategic and Financial Benefits
- A Successful Amusement Park Operator with Complementary Portfolio of Attractive Assets: The combined company will operate a portfolio of 27 amusement parks, 15 water parks and 9 resort properties across 17 states in the U.S., Canada, and Mexico. The company’s complementary portfolio will include some of the most iconic parks in North America with significant brand equity and loyal, recurring guest bases within the highly competitive leisure space. The combined company will also have entertainment partnerships and a portfolio of beloved IP such as Looney Tunes, DC Comics and PEANUTS to develop engaging new attractions enabled by compelling characters, environments, and storytelling.
- Diversified Footprint and Guest Experiences: Cedar Fair and Six Flags have minimal market overlap of park operations, and the combined company’s complementary geographic footprint is expected to mitigate the impact of seasonality and reduce earnings volatility through a more balanced presence in year-round operating climates. The portfolio will include diversified experiences for guests including safaris and animal experiences, campgrounds, sports facilities and luxury lounges, enabling the combined company to better meet rising consumer demand for varied and engaging entertainment options.
- Enhanced Operating Platform to Improve Guest Experiences: By uniting Cedar Fair and Six Flags’ complementary operating capabilities, the combined company will benefit from a more robust operating platform for improved park offerings and more efficient systemwide performance. The companies expect to leverage Cedar Fair’s recent park investment experience to accelerate the transformation underway across Six Flags’ portfolio. Cedar Fair and Six Flags will seek to create a more engaging and immersive guest experience. The combined company will also offer expanded park access to season pass holders along with an enhanced, combined loyalty program featuring additional perks.
- Experienced and Proven Leadership Team: The senior leadership teams of Six Flags and Cedar Fair bring different and complementary skillsets and experience to the combined company, including decades of park operating experience as well as significant expertise integrating businesses and achieving synergy targets.
- Significant Cost Savings and Revenue Uplift Opportunity: Following the close of the transaction, Cedar Fair and Six Flags expect the combined company will benefit from the significant value created by total anticipated annual synergies of $200 million. Approximately $120 million of these synergies are expected to be related to identified administrative and operational cost savings, which the companies anticipate realizing within two years following transaction close. The companies also expect to leverage their complementary operating capabilities to deliver additional revenue uplift, generating approximately $80 million of incremental EBITDA that the companies anticipate realizing within three years of transaction close.
- Strong Financial Profile: Over the last 12 months, through the third quarter of fiscal 2023, Six Flags and Cedar Fair collectively entertained 48 million guests, and, as a combined company, would generate pro forma $3.4 billion1 in revenue, $1.2 billion1 in Adjusted EBITDA2, and $826 million1,3 of free cash flow4, reflecting run rate cost savings of $120 million and revenue uplift resulting in $80 million of incremental EBITDA. The transaction is expected to be accretive to earnings per share for Cedar Fair unitholders and Six Flags shareholders within the first 12 months following transaction close. The combined company is also expected to have a pro forma leverage ratio of approximately 3.7x net debt to Adjusted EBITDA, inclusive of synergies, with a path to reduce the leverage ratio to approximately 3.0x within two years of transaction close.
- Significant Free Cash Flow Generation and Enhanced Financial Flexibility: The combined company’s increased free cash flow will provide it with greater flexibility to invest in new rides and attractions, broader food and beverage selections, additional in-park offerings, and cross-park initiatives, such as consumer technology and enhanced guest services. The combined company’s resources are expected to be strategically deployed to grow attendance, increase per capita spending, and improve profitability, all while enhancing guests’ value and experience across the park portfolio. The combined company is committed to allocating capital to maximize shareholder returns once the company achieves its targeted net leverage ratio.
Leadership, Corporate Governance and Headquarters
The combined company will be led by a proven management team that reflects the strengths and capabilities of both organizations. Upon closing of the transaction, Richard Zimmerman, President and Chief Executive Officer of Cedar Fair, will serve as President and Chief Executive Officer of the combined company and Selim Bassoul, President and Chief Executive Officer of Six Flags, will serve as Executive Chairman of the combined company’s Board of Directors. Brian Witherow, Chief Financial Officer of Cedar Fair, will serve as Chief Financial Officer of the combined company and Gary Mick, CFO of Six Flags, will serve as Chief Integration Officer of the combined company.
Following closing of the transaction, the newly formed Board of Directors of the combined company will consist of 12 directors, six from the Cedar Fair Board and six from the Six Flags Board.
Upon closing of the transaction, the combined company will operate under the name Six Flags and trade under the ticker symbol FUN on the NYSE and will be structured as a C Corporation. The combined company will be headquartered in Charlotte, North Carolina, and will maintain significant finance and administrative operations in Sandusky, Ohio.
Approvals and Closing
The merger is expected to close in the first half of 2024, following receipt of Six Flags shareholder approval, regulatory approvals, and satisfaction of customary closing conditions. Approval by Cedar Fair unitholders is not required. Six Flags’ largest shareholder, which owns approximately 13.6% of Six Flags’ shares outstanding, has signed a voting and support agreement to vote in favor of the transaction. The transaction is not expected to trigger any change of control provision under Cedar Fair’s and Six Flags’ respective outstanding Notes. The companies expect to refinance their respective revolving credit facilities, and Six Flags expects to refinance the Six Flags Term Loan, ahead of transaction close.
Cedar Fair and Six Flags Third Quarter 2023 Results
In separate press releases today, Cedar Fair and Six Flags reported results for the third quarter of fiscal year 2023. The Cedar Fair release is available at https://ir.cedarfair.com and the Six Flags release can be found at https://investors.sixflags.com.
Advisors
Perella Weinberg Partners is serving as exclusive financial advisor and Weil, Gotshal & Manges LLP and Squire Patton Boggs (US) LLP are serving as legal counsel to Cedar Fair. Goldman Sachs & Co. LLC is serving as exclusive financial advisor and Kirkland & Ellis LLP is serving as legal counsel to Six Flags.
What a bummer about Bob Saget.
Stamos on his present media tour, has given some great stories, and has been really warm about it.
The Atlantic had a column on this recently that just crossed my feed.
https://www.theatlantic.com...el/675440/
It's paywalled, but the money shot, if you will:
Comedians love comedy. They love it more than anything else: more than truth, or people, or the vision of a more just society. That’s what makes them comedians. It’s a gift, a faulty chip, or a quirk of evolution. As Steve Harvey put it, talking to Jerry Seinfeld: “Tragedy strikes. I got news for you. We have the jokes that night.” Comedy goes where the pain is—yours, mine, the comedian’s, the world’s—straight to it, because that’s where the laughs are; because the laughs are pain, transmuted. Simple as that. Comedy has no responsibility. It never will. And we need it like air.
Bassoul is getting a $3 million closing bonus. $1.5 million restricted stock bonus to be paid by end of the year. And $1.5 million at consummation of mergers. Don't remember if that was announced as part of the merger announcement.
Part of me still wonders if something between now and "sometime in 2024" will stop this merger from happening. Perhaps it's just wishful thinking on my part?
Zimmerman is also getting $3.5M and Tim Fisher and Brian Witherow are both getting $2M if this deal closes.
Its, very unfortunately for the Cedar Fair parks themselves, for the guest experience and for CF employees (except those that are former Paramount folks), happening.
I wonder if the $11M bonuses to 4 employees was considered as part of their “synergy cost savings”
It seems clear that this major restructuration will probably have less offerings for the guests (less rides, parks, etc...) in the future.
This. I still don't see how combining the companies, even with the Cedar Fair team in charge with Six Flags as name recognition, creates a better experience for guests. Both companies have already been in budget cut mode this last year or so, and I don't see a combined company that significantly reduces competition as the way these budgets expand.
I am still hoping the Cedar Fair parks do not get any sort of "flagging" at all and that this sort of winds up like when two retail or restaurant parent companies merge, but nothing actually changes with the specific brands. Sure, you may get a website or app that showcases all of the parks. But my hope is the current Cedar Fair parks keep their names, attraction names and Peanuts theming and the current Six Flags parks keep their stuff the same.
Meanwhile, our budgets are continuously being slashed and we're continuously being told there's no money for things we've long been in need of. And not the nice to haves (that's a whole different story). I mean pretty basic things to do our job safely. Like work/safety gloves for example. We are often told we shouldn't be doing something a certain way because it's unsafe but then also being told no when asking for the tools/equipment/resources needed to actually do it safely. Safety is always a priority, until we need to spend money to do something safely.
Needless to say, vibes have not been good lately. Worst penny pinching I've seen in my time here.
I think I’ve probably already said this in this thread, but I’m not sure how many of these parks are in competition with each other vs competing with other ways of spending leisure time.
I can’t believe I’m about to say this, but, Comcast is our only hope to stem this pennypinching tide. They are the only company increasing their offerings, and plusing their experiences. I sincerely hope Epic Universe is a smashing success as only then will the industry take notice (again, their Potter expansion is what lead to the increase in investments/offerings of the 2010s.)
2022 Trips: WDW, Sea World San Diego & Orlando, CP, KI, BGW, Bay Beach, Canobie Lake, Universal Orlando
Brian Noble:
I think I’ve probably already said this in this thread, but I’m not sure how many of these parks are in competition with each other vs competing with other ways of spending leisure time.
I agree....in my case being from Chicago the closest parks to this area are SFStl., CP and KI.
If I were to ask family, friends or coworkers about those parks, when it comes to SFStl. very few would even know St. Louis had a Six Flags park and the same can be said about Cincinnati and Kings Island. I probably couldn't find a person on the street who knows anything about it. Most have heard of Cedar Point due to increased marketing in the Chicago area the past decade, but I only know a few people who have actually have taken a trip there.
These parks are very regionally known only, no matter how much we might know about them. They are basically like famous regional newscasters or weatherman. If you're not from Chicago do you know who Tom Skilling is? (maybe not the best example since WGN used to be national)
Great America has more competition from things like the Shedd Aquarium, Brookfield and Lincoln Park Zoos, Wisconsin Dells or any of the many attractions and museums in downtown Chicago or Milwaukee. What is added to Cedar Point, Kings Island or Six Flags St. Louis has pretty much no impact on Great America. In order to keep guests coming, it won't matter if they are all owned by the same company. They are still going to have to build new attractions and provide good customer service or guests are going to find something else to do....or just plan a trip to Disney/Universal instead.
We, enthusiasts, care and fear that merge, but the general public doesn't. Most won't even know until they show at a park and see the name change. I think it's fair to say that with the economy these days most of the parks aren't really competing against each other but with other ways of spending leisure time and money. Money is getting tighter for everyone. We all want to see our parks remain open but the sad reality is that in the not so long run some will close and rides will be shipped to other parks as new rides.
BrettV:
I still don't see how combining the companies, even with the Cedar Fair team in charge with Six Flags as name recognition, creates a better experience for guests.
What they are promoting is that with a larger company, they will have more purchasing leverage which frees up dollars to deliver a better experience. Same applies to corporate operating efficiencies. But we should be skeptical.
The reality is that the single biggest cost is employee wages and no matter how big the company is, you need an abundance of labor at each park to make a park a great guest experience. All three public operators (Six, Seas, CF) have been hacking away at labor since Covid in an attempt to regain the same levels of profitability. But no one has figured out how to make the experience for guests better while using less labor. My prediction is that the savings they expect to find post merger will go towards maintaining the existing staffing levels.
The capex side is interesting and I'm surprised no one has talked about this yet. The tax-advantaged LP structure of Cedar Fair limited the amount of capital that could go back into the business as a function of cash flow from operations. The new company will be a C type which will not have these same restrictions. So perhaps they are willing to take on a higher proportion of long-term debt to invest in guest experience. But what everyone here on CoasterBuzz is griping about really comes down to how these parks are operated, not so much the investment side.
The guy who made, Closed for Storm, just made a video about Six Flags as part of his ‘Bankruptcy’ series on YouTube. Gives a brief, 30 minute overview of the history of Six Flags from inception to present day. Serves as a timely refresher of the growth and troubles of the company
You must be logged in to post
