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 agree for the most part Jeff, but as far as Six Flags Great America is concerned, I really think it depends on what age group you are in. A lot of younger people (35 or below) are more likely to call it Six Flags more so then Great America....where as older people seem more likely to call it Great America likely because they remember it as that from the Marriott days.
Since the late 90's all the marketing involving Great America has really focused on the Six Flags name in commercials and radio ads, often times they barely mention the Great America name until the logo at the end. Likely due to them using the same national ads throughout the country.
I respect your perspective, Dave. You've been watching it longer than anyone one in this community. You're an OG and I appreciate you sticking around.
Jeff - Editor - CoasterBuzz.com - My Blog
One thing is for sure, this merge is not good for the customer. We will probably see a few parks closing for good and some being sold to new owners. With the aftermath of the pandemic and the looming recession I understand the merge was maybe necessary from an economic standpoint. I mean Six Flags and Cedar Fair exist to make money. With less competition we will more likely pay a little more and have less choice. I find it sad for the Cedar Fair name going away.
CoasterDude316:
I agree for the most part Jeff, but as far as Six Flags Great America is concerned, I really think it depends on what age group you are in
Spot on Dave. Specific to Chicago names stick as well. The Willis Tower is still Sears Tower, Guaranteed Rate Field is still Comiskey Park or Sox Park, Macy's is still Marshall Field's, etc.
Rick77:
With the aftermath of the pandemic and the looming recession I understand the merge was maybe necessary from an economic standpoint.
Why?
Jeff - Editor - CoasterBuzz.com - My Blog
Lots of posts about Six Flags as a brand name. The name really isn’t appropriate for any park outside of Texas since the “Six Flags” really references the 6 flags that have flown over Texas in its history.
Over Georgia and Over Mid America were also themed similarly. Thats the only two parks besides over Texas they built from scratch and themed similarly.
2022 Trips: WDW, Sea World San Diego & Orlando, CP, KI, BGW, Bay Beach, Canobie Lake, Universal Orlando
Not sure what the appropriateness of the Six Flags name outside of Texas has to do with recognition of the brand, especially now, 56 years after the brand expanded outside of Texas.
Six Flags Over Texas doesn't even fly the six flags over the park. (Which riles up all sorts of people that don't like change.)
Lord Gonchar:
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. (
This is very true.... I learned it while working for Doordash (on the corporate side). Customers who don't tip their drivers are far more likely to complain/leave bad reviews/cause drama. It's an interesting correlation that holds true a huge percentage of the time. When delivery drivers learn this rule, they stop taking no-tip orders, which causes a "doom loop"... customer who don't tip don't get their orders on time (because drivers see the lack-of-tip, and know they will be a difficult customer), and this causes the the no-tip customers to leave even more bad reviews since their orders are late.
So it makes sense that the "value crowd" (SF customers) are more likely to nit-pick and complain. I'm trying to think if this somehow causes a similar doom-loop in SF operations.
This year, I visited a SF park for the first time in a decade, and it was fine. Not perfect, but not bad either. I was surprised to be able to buy a Bring-a-friend ticket for $9.99.
But the technology that was used to buy the ticket was awesome! My friend logged into the SF website, got a code attached to his season pass, and I entered the code and was able to pay for my discount ticket with my own card. That impressed me.
So SF parks do have a few good things to offer the new company. Technology is one of them.
But I totally understand giving away the gate. I only spent $6 in the park the whole time I was there, for a water. We were only there for half the day. We ate fast food before and after. I was moneybags for that trip, and would have spent a lot more at the park, but didn't for some reason.
-Travis
www.youtube.com/TSVisits
GooDFeLLoW:
This is very true.... I learned it while working for Doordash (on the corporate side). Customers who don't tip their drivers are far more likely to complain/leave bad reviews/cause drama. It's an interesting correlation that holds true a huge percentage of the time
Yeah. I have a fair bit of second-hand hospitality experience through my wife of three decades. This absolutely holds true as a general rule of thumb. (Hence, my comment about the problems of moving downmarket in some post along the way)
They just need better customers. CF can hopefully help provide (and overcome) that.
Or, "SIX FLAGS SUXORS!!!! CF IS RUINED!!!!"
LostKause:
But I totally understand giving away the gate. I only spent $6 in the park the whole time I was there, for a water. We were only there for half the day. We ate fast food before and after. I was moneybags for that trip, and would have spent a lot more at the park, but didn't for some reason.
I think we all know the reason for that: Food at Six Flags is awful and overpriced. You and your friend probably knew that you could get the same (or better) quality and amount of food by eating fast food outside of the park. Fast food places know this too, that's why there are so many of them outside of every major theme park, and their hours mirror the parks'.
One thing that Cedar Fair (or at least Cedar Point) is doing, is actively trying to change that perception. And it seems to be working. A few weeks ago I showed up just after the 6pm opening for HalloWeekends and the line to Backbeat and the Farmhouse were longer than the coasters! Not only did these people "Drive right by McDonalds to eat at Backbeat," they also chose to spend a decent amount of the time they paid to be in the park eating food over rides or haunts.
That's where I have some hope that CF can get their operations together. Clearly they've got the culinary going in the right direction. I met that VP early this year, and to hear her talk about it, they're pretty committed to making the food an attraction. Now we just need someone to look at ops with the same enthusiasm and determination.
Jeff - Editor - CoasterBuzz.com - My Blog
In recent years, I have driven to CP on days that I knew I would only get a few rides in on, but, knew i was going to get 2 REALLY great meals. BTW, the prime rib at KD i had early this season was probably the best I've ever had.
SF Great America has had decent food, but, what makes it better is the mobile ordering. While there are glitches every now and then, not standing in line is awesome. The food was actually ready by the time we got to the restaurant.
CoasterDude316:
EchoVictor:
Chicagoland - 108 miles
MA = 2.8 > SFGAm = 2.7This 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.
Distance data from RCDB;
https://rcdb.com/r.htm?ot=3&no=4578&ec
Someone asked for data instead of opinion around the public's perception of CF vs. SF. I just provided a source of data (Yelp) that was ready available, and I considered relevant. I found the scoring distribution interesting. Thought others might as well. Too bad you don't.
Later,
EV
246 miles driving distance. "As the crow flies" isn't a reliable indicator of how close things are if people have to drive between them.
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