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.
I just got back from California so here are the ratings from the places I visited. Interesting to see Cedar Point in the same ballpark as Disney and Universal.
Disneyland Park = 3.8
Universal Studios Hollywood = 3.7
Yosemite National Park = 4.6
Kings Canyon National Park = 4.6
Sequoia National Park = 4.6
1. It's noted by SF execs that SF has previously called their customers "The Walmart crowd"
2. It's noted by SF execs that Texas customers used their passes to score free parking for other events.
Clearly this isn't a top-tier customer base.
I'd blame SF for that. They created this with their pricing. With that said, a quick scan of those low yelp review scores are often complaints of price.
You reap what you sow.
I still don't think SF has as brand problem. They have a customer base problem.
Lord Gonchar:
I still don't think SF has as brand problem.
Perhaps they do in their local markets?
Lord Gonchar:
They have a customer base problem.
You can't improve your customer base by raising prices without improving the experience dramatically (and getting the word out) and I doubt there will be any patience for what it actually would take to do that.
Totally.
But the SF name attached to a CF park could go a long way towards setting a newer expectation. Along with changes at the SF parks (long hard ones, admittedly [giggity!]) to start pushing the Walmart crowd away using a more CF approach and suddenly you're on the right track.
More importantly, how long before Magnum is the next Ride of Steel?
eightdotthree:
You can't improve your customer base by raising prices without improving the experience dramatically (and getting the word out) and I doubt there will be any patience for what it actually would take to do that.
My own private Gonchback:
eightdotthree:
Disneyland Park = 3.8
Universal Studios Hollywood = 3.7
Yosemite National Park = 4.6
Kings Canyon National Park = 4.6
Sequoia National Park = 4.6
The folks who write the Unofficial Guides have a rule of thumb about this. Whenever they ask "How much did you like <X>?" they assume there is always an implicit "...given how much you paid for it." attached.
eightdotthree:
Lord Gonchar:
I still don't think SF has as brand problem.
Perhaps they do in their local markets?
In the exact same markets, CF wins the head-to-head Yelp score every time;
Los Angeles - 53 miles apart
KBF = 3.3 > SFMM = 2.9
San Fran - 53 miles apart
CGA = 2.8 > SFDK = 2.3
Missouri - 210 miles
WOF = 2.7 > SFStL = 2.6
Chicagoland - 108 miles
MA = 2.8 > SFGAm = 2.7
Southeast - 225 miles
Carowinds = 3.2 > SFoG = 2.4
Washington DC - 82 miles
KD = 3.4 > SFA = 2.4
Philly - 65 miles
DP = 3.1 > SFGAdv = 2.8
Canada - 86 miles
CW = 3.6 > DL = 2.4
Overall, the best rated Six Flags park (SFMM = 2.9) just beats the lowest ranked CF park (WOF = 2.7)
Looks like it's not just us coaster nerds that prefer CF parks....
Later,
EV
Lord Gonchar:
More importantly, how long before Magnum is the next Ride of Steel?
They better do it quick before it sinks into the lake.
EchoVictor:
Looks like it's not just us coaster nerds that prefer CF parks....
I hate to get into semantics, but that's different than "The SF brand has some sort of stigma attached" because I think we ALL know that, as a generalization, the CF experience leaves the SF experience in the dust.
In regards to an aggregate review score on Yelp? Again, customer base. What are the complaints? Who is complaining? How much overlap between the survey groups?
The immediate example that I think of is that a "Walmart crowd" kinda guy is going to be very price-sensitive and even more likely to complain about it. (it really is a cycle of declining returns as you put yourself downmarket as a business - I just don't get it, but I digress...)
This:
Brian Noble:
The folks who write the Unofficial Guides have a rule of thumb about this. Whenever they ask "How much did you like <X>?" they assume there is always an implicit "...given how much you paid for it." attached.
And even that falls short because it's ignoring customer demo.
But yeah, on yelp, in similar markets, SF customers seem to be less happy with SF than CF customers are with CF.
With all of that said, the SF brand recognition is very valuable. Much more valuable than any of CF's.
Which, ulitmately, is what I've been trying to express since I jumped in...because it is.
Lord Gonchar:
Much more valuable than any of CF's.
SF's market cap disagrees, unless the whole of that value is just the name.
Jeff - Editor - CoasterBuzz.com - My Blog
I'm thinking about it like this: Six Flags' brand equity is basically national - you know what a Six Flags is, even if you don't live near one. There is a certain segment of the population for whom it's strongly positive, and another chunk - both enthusiasts and people who would never be caught dead near an amusement park - for whom it's strongly negative. I have no idea how to do the math on that. In one sense, what do you care if 2/3 of the public hate you if the other 1/3 love you and fill up your parks.
Cedar Fair has basically zero brand equity as "Cedar Fair" (except among enthusiasts). But each of its parks has some level of reputation locally, probably better than Six Flags. If you add all those individual parks up, you get ... something. Whereas in NYC, for example, I don't really think "Great Adventure" has any local reputation beyond what "Six Flags" already has.
Whether CP + KBF + ... + MIA > Six Flags, I have no idea.
(Certainly all > RRR)
And that's just it... you don't need a corporate owner name in front of a park. No one is gonna be like, "Which Kings Island do you mean?" Cedar Fair was never intended to be a brand, ever. It's just Cedar Point + Valleyfair.
I think the anecdote about the regional name recognition research on the CF parks is pretty interesting, and if the leadership is at all self-aware, they'll understand not to mess with things. I wonder if some markets would want to just drop the name entirely. A lot of people from Chicago seem to primarily call it "Great America," and my skip level boss does the same for the California park.
Jeff - Editor - CoasterBuzz.com - My Blog
hambone:
I'm thinking about it like this: Six Flags' brand equity is basically national - you know what a Six Flags is, even if you don't live near one.
Cedar Fair has basically zero brand equity as "Cedar Fair" (except among enthusiasts).
Exactly, and Gonch said as much back on page 1:
Lord Gonchar:
No one knows what a Cedar Fair is.
...and everyone knows what a Six Flags is. This is what I perceived as the underlying point he's tried to convey to everyone here who's listing Yelp ratings and NPS scores and CEO quotes about Walmart customers. Anytime I mention Cedar Fair (which is not often, mind you), I get a head tilt and maybe a light bulb goes off and they ask if it's got something to do with Cedar Point in Ohio...most don't know Kings Dominion / Island et al are even part of the same chain, even after 17 years. Six Flags, on the other hand...everyone knows they're all over the country.
Jeff:
I wonder if some markets would want to just drop the name entirely.
I think this would be smart in a lot of places. Heck, I think the Cedar Fair parks should ditch the consistent branding and go back to their original logos (not that anyone really knows Carowinds uses the same font as Kings Island - just, I never understood that in the first place.)
Vater:
...and everyone knows what a Six Flags is. This is what I perceived as the underlying point he's tried to convey to everyone here who's listing Yelp ratings and NPS scores and CEO quotes about Walmart customers.
Exactly. Then Coasterbuzz happened.
The SF brand is valuable.
EchoVictor:
Chicagoland - 108 miles
MA = 2.8 > SFGAm = 2.7
This is one of the most ridiculous things I have seen. MIA and SFGAm are not 108 miles from each other.....there is a great lake between the two and they most definitely aren't in the same markets.....and a lot of your other comparisons aren't much better.
Not from an in-market perspective, sure, but even if you don’t consider them competitors in similar markets, Michigan’s Adventure tying Great Adventure and beating Great America is certainly worth noting. Clearly people feel the CF park experience is at least slightly better, and often significantly.
13 Boomerang, 9 SLC, and 8 B-TR clones
I think the "because CoasterBuzz" is just as much a reason to lean into the idea that Six Flags is unimportant as a brand. None of the existing Cedar Fair parks are important because they're Cedar Fair parks, and branding them as anything else would not be a plus. Whomever had the post about CF's CMO and the name research certainly supports that. It doesn't matter that Cedar Fair itself was not a brand. As I said earlier, it's just a name because the controlling interest of Cedar Point bought Valleyfair decades ago.
One of my directs at work lives in Buffalo. He was talking the other day about how Darien Lake is just Darien Lake, and the intermittent branding as Six Flags, between when it owned it, then didn't, then did, is irrelevant. It's a smaller market version of what I was talking about in Chicago and Santa Clara. If I were to commission a study about the importance of the brand, I suspect that it would matter the most at Over Texas and Over Georgia, and maybe the other parks where people don't remember anything else (perhaps St. Louis and America, at best). The rest were "flagged" after the fact.
Jeff - Editor - CoasterBuzz.com - My Blog
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