Cedar Fair quietly seeks buyout

Valleyfair! - 1978
Dorney Park - 1992
Worlds of Fun - 1995
Knott's Berry Farm - 1997
Michigan's Adventure - 2001
Geauga Lake - 2004
Paramount Parks - 2006

^ I would say no, they haven't.

But, the one thing I would offer up, and maybe this is just naive thinking - what about if they're confident in the business' ability to make money year-to-year, just not necessarily to grow? It's always bugged me that investors look at this company like it's Joe's Widgets on Main Street who can get a couple of other customers to come in, buy their product and increase their profits from year to year. This business doesn't really work that way. At this point, you'd have to figure that a lot of Cedar Fair's parks have "saturated" their markets. Detroit, Cleveland and Toledo are only going to be able to generate so many more trips to Cedar Point. Cincinnati only has so much population to visit King's Island. These are regional destinations, and all the advertising in the world cannot (in my opinion) bring in the numbers of new visitors needed to make a *percentage* difference at the bigger Cedar Fair parks. These parks aren't Disney, no matter how much we love 'em ... they're not the worldwide attractant that damn rat is. But a public investor doesn't give a damn about that, they want to see percentage increases.

Maybe at this point, the majority of Cedar Fair's parks (or at least, the bigger ones) have reached that "market saturation" and are making money hand over foot and anything the company would have to do to increase that would ruin the in-park experience, or cause the company to spend so much in advertising and "get rich quick" type schemes to increase attendance that they'd put themselves under. So, go private, have no one to please but the bankers, and don't worry about what some fool with a Wall Street Journal who thinks he knows about running an amusement park.

Just my 2 cents for what it's worth ...

I hope SFI buys it then they will have Flashpass at all the parks LOL

Yep, I can just picture it now Six Flags Cedar Point

Not only would they have Flashpass but they can keep Johnny Rockets too! Watch them quickly add some of those "family" attractions.

*** This post was edited by Cs6153 7/9/2007 8:06:06 PM ***

^But honestly, there isn't any other chain out there right now that COULD buy them... shudders to think of Six Flags Worlds of Fun.

I dread to see how a private equity firm would run the parks.

The lack of growth is a good point, but investors knew what they were getting into. The big problem is that Cedar Fair's convincing thesis for buying Paramount Parks was a compelling slide show that revealed the disparity in operating margins (which is essentially how much operating profit a company milks out of every dollar in revenue) between Cedar Fair and the Paramount chain. The plan was to bring those margins up to Cedar Fair's standards within three years. Giving up early in the second year would indicate that the thesis is flawed.

Growth is supposed to be slow, but there are some things that are assumed. Inflation is growing at a 3% clip, so all things being equal, the top line should grow by 3%. Folks began to see Cedar Fair opening new resorts (Lighthouse Point and Castaway Bay in Cedar Point, buying up the Radisson adjacent to Knott's Berry Farm) and expected out-of-park revenues to climb, too. Inside the park, Six Flags is an extreme case, but they are now on the second straight year of boosting per capita revenue (what the average guest spends) big time, even if it's costing them in attendance for now.

So no one is expecting Cedar Fair to be a burner but 2005, 2006, and now 2007 have been disappointing financially.

A merger wouldn't help to reduce expenses and thus would be useless.

A private equity firm wouldn't run the park they would finance it and then they would hire (in the case keep) people who know the business. They would also expect a return on their investment and there would likely be a clause giving them the ability to bring in new players after a certain amount of time if the deal didn't perform as expected.

There is no way that someone (or entity) is going to write a check for $3.5 billion and then turn away.

Not all PE firms, even Blackstone, seek to flip & f$^% as Jeff so politely put it. As for all the speculation about CF being in financial trouble, their debt load is much less than SFI and they (CF) remain profitable.

It is also not unheard of for current managment to stay in place for X amount of time.

The economics of this are a little unusal - but not unheard of. Plus - shopping is not always buying. The unit price went up almost $1 today, that's where people win - some big, most small.

It's too soon to panic, it only shows that the CF folks are exploring options.

My take...without reading professional commentary...This would be a brilliant move by Cedar Point to get somebody to finance their debt. I highly doubt this would happen. Private Equity investing is about getting big returns on investments. Most the big dollars in the private equity conglomerate are guys whose hedge funds no longer cut the mustard. I just do not see how the amusement park business…especially the regional themers is going to be all that great in the ROI department. We’ve discussed the slow growth thing to death. This may be the poison pill that keeps private equity out of our hobby. In this case…I would consider this a good thing. If private equity gets involved (however sound a financial decision for Cedar Fair), you can bet that a lot of parks we consider “safe” would no longer be untouchable.

Another point…if this is indeed true…I see this as an admission from the Cedar Fair decision makers that they bit off more than they could chew with the Paramount acquisition.

My final…and much more pessimistic take (which may be attributed to a general poor mood at the moment)…is that all regional themers…specifically those of Cedar Fair and Six Flags are in dangerous territory for survival given economic trends. Condos and mixed use facilities are taking over the country in every urban area…and some “not so urban” areas. In Irvine California, Wild Waters is getting leveled after this year for more mixed use housing…for example. This is a park that has good attendance. They simply cannot generate the kind of tax revenue that condominiums can. The Myrtle Beach Pavilion did the same. Magic Mountain is hanging on by a thread….so on and so forth.

It is not too difficult to imagine a time when Lake Erie peninsula property becomes much more profitable to the local economy and government as high-rised-property-taxed-water view condominiums complete with another Gap and TGI Fridays in the Courtyard. I’m as capitalistic a person that you are ever going to meet…but I cannot shake the feeling that we would tear down the Washington Monument to put a Cheesecake Factory if the tax revenue could justify it. I find something very sad about this trend.

Ambiance, tradition and nostalgia are so passé. It is not just the small independents that are in position to “go away” in the current business climate. In fact…I argue that it is the larger regional themers near urban areas and/or profitable land valuation sites (i.e. on a lake) that should be very worried. There are simply much more profitable uses of land than an amusement park. This is especially true in the temperate climates where amusement parks are profitable for 1 or 2 quarters per year.

If private equity enters the mix…it won’t be long before they figure out the best way to get the largest ROI. This won’t be in the amusement park business for many of the current sites.

P.S. I could make an argument that the private equity boom has already passed its peak…but I’m too tired to do that now! But my general point is that private equity would accelerate an alarming trend of tearing down nostalgic amusement parks and replacing them with mixed use condominiums (see Coney Island).

^I can give you at least a little bit of solace; I'm a registered professional planner, so I get a lot of publications and have a decent feel for where planners feel the future of development is headed. And that future, while it still does include a lot of the development you're talking about, also recognizes that the market in many cities is become oversaturated with single-family cookie cutter housing communities. Many people are trying to return to the city, or going for a lifestyle that at least involves more walking and less gas wasted looking for a parking place. So, while I would agree that some of the higher land value parks are in trouble, I think they've "retreated from the abyss" moreso than 3 - 5 years ago.

Parks that are more likely to be in trouble are those like Elitch Gardens that are kind of smack-dab in the middle of the city and could be a prime location for mixed use apartment/retail development on a city-limits brownfield site.

Jeffery Smith that might work for some parks but not all .Example, This would not happen to great adventure because I think the locals would rather have great adventure there then a whole bunch of new housing. The park is also on environmentally sensitive land being so close to those lakes and stuff.

Great Adventure isn't a Cedar Fair park though. Cedar Point is. Cedar Point also sits on a BEAUTIFUL parcel of land. I believe that was his point. At some point, America needs to realize the almighty dollar isn't the most precious thing in the world.

It won't happen to ALL...but it will happen to some. As a capitalist...I pray for the day mixed use condo projects are not profitable. I need another Ruby Tuesday's like I need another Vekoma Boomerang!

Locals in Myrtle Beach, Irvine, Brooklyn, Houston, etc were all upset to some percentage in the last year or two. I only opine that the day is coming where locals in Sandusky, Denver, San Francisco, St. Louis, Atlanta...you get the point...COULD feel the same!

Any park that sits on land that COULD derive more taxable income through other uses...has good reason to worry. One only needs to look at the trends.

The trends are not good for this hobby of ours...

Cedar Fair for sale? really? Cedar fair claims that their profits are up because of high prices on food but its bad for attendance anyway they got the consequences and now being auctioned to another company. If being sold to companies such as Six Flags. Cedar Point is their goldmine because it gets the most Guests than any other park.

It seems that kinzel wants to sell it even when he still boss thats pretty wierd but the company's main park Cedar point will be sold maybe or not.

^ HUH?

---

Cedar Point is their goldmine because it gets the most Guests than any other park.

---

Umm, no.

If there's one "gold mine" in the CF chain, it's northeast of CP, by ummm, 228 miles (as the crow flies, per rcdb).

Dick Kinzel called PCW the "hidden gem". He must have failed to read my posts about the park. ;)

Oh, and *quietly* seeking a buyout....is hard to do when there are so many "gossips" around here...LOL! :)

Maybe it's all a shrewd ploy to move the stock. "Leak" the idea that the company is putting out feelers for a PE firm to buy them out. Let everybody speculate about who it could be--- maybe even Blackstone. Wow-- let's buy some shares now and in a couple of months or years, Blackstone might pay us twice as much as what we buy them for today!

Just throwing that thought out there. I don't know if that was the motive, but the stock did go up a dollar in one day, with double the average number of shares traded.

You know I really need to get up there to PCW soon. It's the one Para...um I mean Cedar Fair park I've never been to.