Posted Tuesday, January 12, 2010 11:31 AM | Contributed by Jeff
Unlike the average investor, executives will be required to buy back some of their stake in Cedar Fair if it goes private as part of a $2.4 billion acquisition deal by Apollo. According to the terms of the acquisition by the New York private equity firm, a 6 percent ownership stake in the company has been set aside for select employees, consultants and directors of Cedar Fair.
Read more from The Plain Dealer.
Also: Apollo says they will continue to support the company's direction. Read more from The Sandusky Register.
So let's sum this up: The company (allegedly) has to be sold to meet its financial obligations, due to the failure of the executives to do their jobs. They'll get a big cash payout from the sale. They'll keep their jobs in the acquisition. If they get fired from those jobs they'll get really big payouts. Unlike the rest of us, they'll get to reinvest and potentially mitigate their losses, much of which are on paper anyway since I doubt they were buying a lot of units themselves. If the company fails or succeeds under their continued leadership, they win again.
I'm pretty sure I know now how to vote on this. I don't care if it's an emotional response either, because this is absolutely ridiculous.
I'd like to see the acquisition vote fail and a unit holder lawsuit to replace the board. They've completely failed to look out for investors and only look out for themselves.
If the major financial institutions invested in Cedar Fair do not stand up and loudly call for the removal of the Board of Directors then I just don't have any understanding of business.
This is a boondoggle of epic proportions.
That's the problem, I read in one of these recent articles that most investors are individuals with a couple hundred units here and there, something like 75%. But yeah, I can't believe someone doesn't stand up and say how ridiculous this is.
I'd rather have Snoopy and Woodstock run the company.
Seriously, I was voting no already. But this little article just clinched it. It basically demonstrates to me that the unitholders are the one and only party whose interests aren't considered. Not only not considered, at this point I say blatantly lined up to take the crap while everyone else profits.
Kinzel gets millions and the potential for more, same with Falfas, Crage and several others. Apollo is certainly not doing this for charitable purposes. In fact, now I think it can be argued that the Board willfully and deliberately undervalued the price of the units in order to make personal profit through the sale. A portion of the money that Apollo doesn't have to pay to unitholders now goes to the Board members. And they get to continue making money after the sale, unlike the regular unitholders who basically lose out and that's that.
That's looking out for the unitholders' best interests? No thanks, P. Rick Kinzel.
If the stockholders vote no, what happens next? Do people think Apollo will come back with a new offer eventually? Do people think Dick then gets the boot? Just wanting to get people's opinion
I gotta say, the increasing bad blood with the unitholders cannot be viewed positively by anyone in a position of power in the merger, even Apollo. It makes me wonder if those in power (namely Kinzel and the Board) even care much right now what is happening outside the walls of the boardroom that calls and conferences are taking place in. The amount of work to placate investors by both parties has seemed at best minimal and reeks of disinterest.
I couldn't have said it any better Jeff. This is why corporate America always gets the better of the little guy who invests. We have seen this so many times in the past with large companies screwing out the stockholders. If I owned shares in this i would also vote no.
It sucks to know, that they are trying to once again screw the little guy. Why is it that the people responsible for messes never get punished and in this case would be rewarded for their failure. If someone fails in school, they get held back albeit they get to try again. When business fails people should never get second chances at it. This is the blind leading the blind with these two companies working hand in hand. It makes me sick.
Resident Arrow Dynamics Whore
I think painting the broad brush about "corporate America" is irrational. They aren't "trying" to screw anyone, they're just incredibly inept.
Or maybe they're just ineptly trying to screw investors....
My author website: mgrantroberts.com
Well i do understand the risk/reward factor when buying in, so i guess screwing someone is probably not the best choice of words. However, they still make out nicely when they did nothing to better the situation.
Resident Arrow Dynamics Whore
This is a HUGE scandal of the same proportions as the collapse of the financial markets in 2008/2009! There absolutely needs to be a lawsuit against the Board of Directors. I wish someone with the fortitude, knowledge and time would step forward to do what needs to be done.
I keep telling people this is Kinzel & Co.'s game plan to protect themselves from losing their jobs. They know there is until holder unhappiness out there, they know Cedar Fair "fans" are turning on them, and they know they are entering the same situation Six Flags was in before Dan Snyder's take over and removal of the entire failed Premiere Parks regime. Dick, Jack, Peter and the entire Board of Directors all need removed from office, NOW!
Why is litigation necessary? If more than 1/3rd of the unitholders do not like the Apollo deal (whether they think the price is too low, they don't like the deals Kinzel & Co. have struck, they are just in a bad mood or whatever other reason), it won't be approved. How are they getting screwed or on what basis do they have a complaint at that point? If 2/3rds of the unitholders approve the deal, the merger will be consummated. At that point the unitholders voting no may complain but that is the deal they signed up for when they made the investment.
If folks do not like the management of a company in which they invest, do something to get new management in place. If that is not working out (which will likely be the case if the Apollo deal isn't approved because getting the fragmented unitholders to move in the same direction with respect to management will be like herding cats), sell the investment. Its amazing to me to see folks who believe that current management is so horrible yet who still own their units. Any time I have concluded after I made an investment that current management is bad, I have sold the investment quickly.
I agree with your summary 100% Jeff. I also see what MagnunBarrel is saying as well. This certainly isn't the first time something like this has happened in corporate America, but it definitely brings it close to home and puts it in terms that a lot of us care about and can plainly see.
Saying all executives are EVIL is certainly not true and the same goes for saying all companies are evil. I am certainly not anti-big business by any means. I am heavily invested in stocks and like to see businesses succeed and investors get their piece of the profits. But it's easy to see how the little guy feels, and IS in fact, screwed in a situation like this. The very people who caused the downfall are going to walk away with millions of dollars above and beyond what their units are worth and presumably not "suffer" like the investors - the ones who actually took the risk and provided the capital for the business in the first place. Moreover, the idea that they negotiated this deal in the best interest of unitholders simply conflicts with all the disproportionate "perks" they (the executives and a board full of hand picked yes men) seem to have gotten in the deal. Who's to say if all these provisions for contract extensions and buyouts weren't in place that the shareholders could not have gotten $12 or $13 per unit?
Jack Bogle writes about this stuff in his books. He used to rail against the mutual fund industry for charging high fees and adding no value, often under-performing a simple index, but his latest book ("Enough") shows how the transition from an owner's society to a manager's society has taken place in many industries and is endangering our economic future. He was the founder of Vanguard - the only truly "mutualized" fund company. Why should managers of funds or executives of any company skim money and get rich when it's the investors themselves that are taking the ones taking the risk?
It's too bad there can't be some sort of framework in place to allow individual stockholders to be represented and vote against such blatent conflicts of interest like having the CEO also be chairman of the board. Or having the company of a board member do the due diligence on an acquisition price. For someone who owns a total stock market index, it probably isn't practical to vote your proxy for 5000+ different companies, but it seems like the individual investor is too far removed sometimes.
Hey, I allegedly work for the evil empire. :) I can tell you that being big isn't always bad, and it's not evil either.
^Jeff dont flatter your company, you dont work for Walmart.
Jeff, true lots of folks, and the government have issues with Microsoft and Bill Gates. Know what? If you can build better software than him, then do it and shut up.
Cedar Fair needs to, IMO, consider some longevity of unit holders. Some investors have been part of the shareholder group for decades. I think the timing of this deal over the holidays was irresponsible on their part. Period. It stinks.
Giving them a piece of new 'private' compnay will only push them to work hard enough to hit their budgeted numbers. Thats all.
GoBucks, based on the information the company (Board) was providing its investors, there was no reason before November to believe that the company was in the situation it is now. We were told that they'd be able to deal with the debt, that all the numbers were OK. Sure the unit price was down, but few companies weren't, and some that could be called "better" companies had taken a harder hit.
Over on pointbuzz, I have read for at least the past couple of years (and having recently started to read this site, I see similar views are held here as well often by the same folks) about how bad Kinzel is and how he is ruining/has ruined the company. If I held that view, I would have sold any units I held long ago.
I haven't gone back and read all of their recent public statements. But I seem to recall that early in 2009, they cut the dividend (about in half?) and indicated that they were doing that to help pay down debt. They also indicated that one or two parks were for sale (again to help pay down debt). The parks sales haven't happened. They have not been able to refinance their debt. My guess is that the risks associated with the refinance (in part at least due to an inability to reduce leverage to a level at which lenders were willing to refinance), was disclosed to investors though presumably not front and center. I also suspect that management believed it would be able to refinance though recently the info they received on that front was pretty negative. I have seen underwriters in the past year or so who have been wrong in terms of advising companies on what the debt markets would support creating significant issues for the companies at issue. That may have happened with CF, maybe management just refused to see the writing on the wall or maybe there really was a very quick change in outlook. One thing we have seen over the past 2 years is that huge changes happen literally overnight.
And this still is not a done deal. Unitholder rejection of the sale to Apollo would not surprise me at all at this point. I suspect that a lot of unitholders will be upset about the management equity rollover into the new company and employment agreements even though both are very common in private equity buyouts. We shall see.
When is the vote set for?
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