Cedar Fair and Six Flags announce equal merger

Tekwardo:

The CEO saying they'd like to attract more affluent people doesn't mean the parks have a bad rep.

It just doesn't.

Six Flags fundamentally shifted their entire strategy and operating model to enhance the quality, reputation, experience and brand of their parks so they could shift to higher-income consumers.

They couldn't shift from the Wal-Mart consumer to the Target consumer (Bassoul's analogy) because Six Flags has a reputation for a lower quality product and experience.

The people playing semantics aren't me.

The statement being made is that Six Flags has a bad reputation. The CEO didn't say that. He said they were trying to go for a more upscale clientele. Because they want people to spend more money. Does that have correlation to reputation to an extent? Yes.

But that doesn't equate to the brand being toxic to the point y'all seem to think. Just thoosies being armchair CEOs.

Disney didn't have a bad reputation when they decided to chase more affluent customers.

I think you're deflecting at this point. Regardless of what he said or didn't say about Walmart, that was just one in a number of pieces of evidence that were presented to you in disagreement with your thesis that Six Flags doesn't have a reputation problem.

I think one of the main reasons the Six Flags name is valuable is the licensing deals for being a known brand. You have the park that's being built in Dubai using the Six Flags name for example. Also video games like RCT and some toys licensed the name in the past. So the Six Flags name alone has that going for it.

I think the biggest thing that hurts the Six Flags brand is that people think they're all the same. I have heard many times from family and friends visiting from out of town tell me they have a Six Flags where they live when discussing things they can do while they are in town, and they are usually shocked at how different the park is from their own Six Flags when they visit. Similar in a way to how people don't know the difference between Disneyland and Disney World.

Chicago07:

Six Flags fundamentally shifted their entire strategy and operating model to enhance the quality, reputation, experience and brand of their parks so they could shift to higher-income consumers.

They couldn't shift from the Wal-Mart consumer to the Target consumer (Bassoul's analogy) because Six Flags has a reputation for a lower quality product and experience.

They talked about doing that, but they never actually did anything to improve the parks to make that shift. All they did was briefly raise prices, while keeping the parks the same and were shocked attendance dropped.

Not sure of the validity of this, but it looks like Six Flags unitholders may vote no, opting instead to Geauga Lake/Astroworld some properties instead

https://seekingalpha.com/ne...-fair-deal

Speaking of brand reputation… Reading some of the comments regarding the merger in Cleveland area news sources make the average enthusiast look like six flags loyalist. Every comment is pretty much they destroyed Geagua Lake/ Sea World and Cedar Point is doomed. The Six brand is damaged beyond repair in this market.

So, I've been reading comments from "local" fans over on Facebook and it's kinda interesting. The comments from those here in the DMV (KD/SFA locals) are mostly negative, assuming Six Flags is going to ruin KD. However, on a Kansas City news thread, the people are hopeful that Six Flags will bring the 'fun' back to World's of Fun.

It's an interesting dichotomy to say the least.

there are some possibe upsides to this. the CF Boys take the two top spots. the Six Flags CEO moves to the Board where he will do less damage. The SF CFO, who is the "Integration" dude wil lbe gone in 18 months. He will do a metric f-ton of damage between now and then, but put a clock on him.

THis is a merger for finacial resaons, primarily to spread CF debt over a larger footprint, and kick that can down the road.. there is so much BS in that press release that I had to stop until I could finish myh dinner. There are some hints that CF is going to win the day on this, (e,g, comments about technology etc However,, there will be some painful cuts to the parks and I shudder to think about the changes that they will make to my favorite parks. THere are $200MM in synergies (*cuts) to be made and that's not all coming from "increased purchasing power".

i'm not worried about the overlap listed above, excelpt for sFMM and KBF. The other metro areas (NoRCAL, V irginia and Phiully) are robust enough to support their respective parks, and face it Callifornia Great America will now close even sooner. SFMM and KBF is my worry. KBF is a profit machine but is.a soecial place that CF basically left alone. I'm not sure that restraint will be maintained going forward as the temptation to muck with it might now be too great. SFMM is being encroached by development and those of us old enough to remember the last SF Bankruptcy and the Great Recession know that it'has a tenuous future in a downturn.

Now make my Ulrta Diamond Deluxe with Cheese SF Pass good at all the CF parks and I'll be happy in the short run.

Trying to cut cost is the water/stone thing. Sure, all of SF corporate will disappear, but there wasn't much left in the first place. Charlotte is already top heavy, and whatever lip service they have to Sandusky, I doubt that Zimmerman ever spent much time there.

This could be good for some of the Six Flags parks that are poorly managed, but only if they put the right GM's there and actually let them make decisions. They're mostly order takers these days. Want fries with that?

my thoughts on several issues brought up:
Given that Walmart has a market cap of $445B with Earnings of $24B. Target has market cap of $51B and earnings of $4.2B. Macy’s cap of $2.4B and earnings under $1B. I would chase the Walmart crowd more effectively.

Let’s face it, many of us really don’t have access to both chains and our opinions are driven by loyalty or nostalgia. Objectivity is hard to obtain. That being said, of the 4 SiX parks I’ve been too our family (48, 42, 12, 8) had a blast every time and thought they were great all around. Then we got passes to SWSA and saw a better experience but still loved SIX.

in the call the CF guy mentioned Modifying the capex for the next several years… which would be frustrating… It makes me wonder if SIX threw out those huge numbers last call just to get sales and thoosie support. That being said, It seems this merger might have been Selims goal all along.

This doesn't feel like Walmart merging with Target, this feels more like Salvation Army merging with Crate&Barrel. Brand recognition doesn't mean much when the brand has been cheapened to the point where there is no feel of exclusivity.

Although I feel like there's been a death in the family, I have to imagine that more good than bad will come from this. I think one of the biggest advantages Cedar Fair has over Six Flags is the hypothetical "How to Manage an Entertainment Venue manual". Cedar Fair just seems to have better hiring practices, standards and development.

Sharpel007:

Lots of teenagers without parents and a clear discount tix crowd

My only bone of contention with this is the assertion that unruly adolescents ONLY visit Six Flags parks. Au contraire!! There are NUMEROUS videos available showing fights at Cedar Point, Kings Island, and Knotts Berry Farm. You think that chaperone policy just came into existence for no specific purpose ? Nope. Violence and thuggery and not necessarily indigenous to just Six Flags. Perhaps more prevalent, but in entirety.

On the bright side, I wonder if this means the new company will get off its hind end and finally build the long rumored giga coaster at Knotts Berry Farm and finally add new roller coasters to Valley Fair, Michigan Adventure, Six Flags America, and Six Flags St. Louis ?!?!?!

Benjamin Polson:

Given that Walmart has a market cap of $445B with Earnings of $24B. Target has market cap of $51B and earnings of $4.2B. Macy’s cap of $2.4B and earnings under $1B. I would chase the Walmart crowd more effectively.

Walmart's financial success if not a result of their brand equity, and selling eggs isn't the same as selling entertainment.

From The Motley Fool:

Starting from a much smaller base means that Target has simply posted better growth. Over the past 10 fiscal years, Target's average annual revenue gain of 4.3% is higher than Walmart's 2.7% average increase. As of Feb. 28, Target counted nearly 2,000 stores nationwide, a physical footprint one-fifth the size of Walmart. What's more, Walmart's average operating margin in the past decade of 4.5% also lags Target's 6.3%. The latter clearly has had a better financial profile.

Speaking of brand reputation… Reading some of the comments regarding the merger in Cleveland area news sources make the average enthusiast look like six flags loyalist. Every comment is pretty much they destroyed Geagua Lake/ Sea World and Cedar Point is doomed. The Six brand is damaged beyond repair in this market.

Being in the Cleveland area I can confirm this is a thing. This whole situation makes my stomach turn. From a financial perspective I realize with rising inflation and interest rates and less disposable income for many households a merger may make both companies better able to weather any tough times that may be coming but emotionally it doesn't sit well with me. For many in Ohio our only experience with Six Flags as a company was the Geauga Lake purchase which tends to be seen as the beginning to the end for that park. Whether it was or not, that is the general sentiment of many park guests in the area. I would never not go to a park just because it is a six Flags Park but I have no positive feelings about the brand in general because of its history in my particular market.

There were some semi interesting points on the joint Cedar Fair/Six Flags yesterday though much of it was meaningless Kumbaya moments of management from each company falling over each other to say how much they admire the other, look forward to working with each other, are so excited about the merger, etc. They mentioned the super pass (perks and cost of which it sounds have not yet been determined -- they mentioned each park would continue with pass/membership sales separately through next summer and would look on a combined basis next fall). An analyst said though that they don't have a significant number of people now who actually use their multiple park passes and asked if super platinum passes will move the needle much. There will be a couple parks that are close together which could make it more of an option but still not clear there are many people looking to take advantage. No doubt on sites like this and PB, there are a lot of people who are salivating at the possibilities of super platinum passes but that isn't the norm (just like many here or on PB believe the average pass use at Cedar Point is 20+ times per season but info from the parks indicates that is no where near reality).

They did mention Capex would be allocated based on ROI so there likely will be some re-allocations (not sure how out is locked in relative to plans, agreements, etc) cross chains in terms of investments. Maybe Michigan can look forward to re-treads from Six Flags parks now too.

There was some discussion about Six Flags being more of a national/international brand and Cedar Parks being regional parks/brands. Nothing in terms of how they think branding will work going forward.

Said they are looking forward to managing 40+ parks going forward with no plans to sell any of them. Someone said something to the effect that you can't grow if you are selling. But if you are looking at ROI, selling and reinvesting proceeds in parks of the business that is growing/will have higher ROI makes sense. Don't expect they would tip their hand though in terms of potential sales.

Question was asked about anti-trust review/issues. Neither park's management was concerned. Looking at about 5% of leisure market (not narrowly focusing on amusement parks and the broader leisure market should be the focus). Bassoul made an interesting comment which was meant to address how competitive the leisure market is. Six Flags was expecting they would get an attendance boost from World Series games being played in Arlington (1/4 mile from Six Flags Arlington). But what happened is people parked at Six Flags parks (for free with their SF passes), walked to the WS games, came back to their vehicles after the games and drove home. They had hoped they would go to the parks before or after the games but that didn't happen. Was odd to hear when he was telling the story in terms of where it was going. To me at least it makes me question how much they understand about their customers and the industry in general.

The World Series expectation is odd. The only two home games that ended up being played were 7:00 starts that wouldn't have ended until about an hour before the park closed at 11:00. Game 1 went to extra innings and ended around 10:30 (I think). I don't believe they were open long before game 1 started. Games 6 and 7 would have been tonight and tomorrow night when the park is closed. So they were hoping to get a boost from what appeared to be a very small timeframe.

I dunno, this sounds pretty exciting. Do you think they'll link them all with a Hogwarts Express type of train?

Yeah, I wouldn't worry about anti-trust, because they don't really have direct competition in a meaningful way in any of their markets. But to your point, that story does sound like they don't really get their own industry. That they refer to guests as "consumers," in a hospitality industry, speaks volumes.

Benjamin Polson:

Given that Walmart has a market cap of $445B with Earnings of $24B. Target has market cap of $51B and earnings of $4.2B. Macy’s cap of $2.4B and earnings under $1B. I would chase the Walmart crowd more effectively.

That doesn't really make sense to anyone other than maybe shareholders. It doesn't translate to hospitality industries at all. Well, except that the smaller the retail in your list, I suspect the higher the margins. That's at the core of what I think many of us have been arguing for for years, especially with Six Flags. It doesn't make sense at all to engage in a race to the bottom when you're the only one in the race. Why give away your product? If it's truly valuable and unique, ask people to pay for it, and then give them something that lives up to that cost expectation. Not once in the last few decades have the big theme parks panicked and reduced prices to increase volume. Iger made it a stated goal to have fewer people getting a better experience at a higher margin.

Size is a hard slider to move in this industry, and the biggest growth has been by way of consolidation. We've said it before, Cedar Point's biggest attendance was almost 30 years ago, and they haven't gotten close since. Most markets have one park, and a (relatively) static population. You can't grow that by charging less for what you have, but that's exactly what Six Flags has been doing for years.

Tekwardo:

But again? Can I see some actual proof that people outside of thoosie circles think SF had a bad reputation?

Anecdotes and comparisons that aren't really apt doesn't mean that the brand is tarnished.

LMGTFY

Cedar Fair = 3.35 avg

EAST

KD = 3.4
https://www.yelp.com/biz/ki...-doswell-2

Carowinds = 3.2
https://www.yelp.com/biz/ca...harlotte-2

MIDWEST

CP = 3.8
https://www.yelp.com/biz/ce...sandusky-2

KI = 3.6
https://www.yelp.com/biz/ki...gs-mills-2

WEST

Knotts = 3.3
https://www.yelp.com/biz/kn...buena-park

CGA = 2.8
https://www.yelp.com/biz/ca...anta-clara

Six Flags = 2.62 avg

EAST

SFGAdv = 2.8
https://www.yelp.com/biz/si...-jackson-8

SFoG = 2.4
https://www.yelp.com/biz/si...austell-13

MIDWEST

SFAGm = 2.7
https://www.yelp.com/biz/si...a-gurnee-8

SFStL = 2.6
https://www.yelp.com/biz/si...uis-eureka

WEST

SFMM = 2.9
https://www.yelp.com/biz/si...alencia-12

SFDK = 2.3
https://www.yelp.com/biz/si...-vallejo-7

I figure Yelp is a pretty good apporixmation of GP opinion.....

Later,
EV