Fool's Munarriz: Should Disney buy Cedar Fair

Why don't Disney just buy it leave the name Cedar Fair. Then the things that need to be on par like customer service, food, and Lack of natural shade a lot of Cedar Fair parks have and don't associate it at all with Disney. Then they could pull it off because they will be completely different yet Disney will still make their thousands at their big parks and make money of the smaller seasonal parks.

I would not like to see Disney take over even on those facts because they would have to continue building new things to get people coming to the regional parks I don't know if anyone at Disney knows how to do that without extra theming thus giving them away thus them not making to much money off the deal.

Why in the heck would Disney buy a chain like Cedar Fair if they are getting 14 and 16 million at the parks they already own in the US. I think it would be better to expand those resorts instead of buying Cedar Fair. That's seems so ridiculous. Cedar Point is only getting 3.3 million. Why would they do that?

This is horrible. Paramount get's out of the business. Six Flags was trying to sell the company until Red Zone got on board, and now Cedar Fair might want to sell. I think the problem with these parks rely on the fact that they spend so much money on the flats (S&S Towers and Drop Towers), and get coasters every other year. A Huss Top Spin costs 3.5 million, and for what. That ride stinks in my opinion. Not all coasters are great (you know either). So, you could be spending 15 million on a bad coaster.

Cedar Point's Max Air was a whole lot of money (like 6.5 million). That should be getting huge lines that never end. I don't know what it's getting right now, but that's a lot of money for that particular ride. In my opinion, it's a good ride, but not a great ride. I think a great ride should cost that much instead of just a good ride. It's got height, but no game.

A carnival ride had a line at about 30 minutes, and that ride only costs about 600,000. At a big amusement park in which there are even more people, I would suspect a 45-60 minute line. That's not even close to a 6 million dollar cost like Max Air. Spend wisely, or go bankrupt. Disney can spend 100 million a year, and that's okay because they only have so many parks, and they are so rich. These other companies can't do that. Disney is also getting a lot more people than these other parks.

I'm here to take my lumps, but before I defend my article I hope you've read it as I address -- at least tried to address -- the brand dilution issue that some of you brought up here. I also explain the "blue sky" concepts that Disney showcased back in February (to explain why Disney is already thinking of making a small ball push into more regional attractions).

But I think some of you may have not read past the headline -- seen the ludicrous notion of Disney buying Cedar Fair -- and assumed that I think it is more than just a remote possibility.

It is not a matter of Disney wanting/not wanting Cedar Fair. It's a matter of Disney perhaps being the ONLY company that would be willing to pay more than 10x EBITDA (fancy acronym talk for profit before factoring in interest income, taxes to pay, debt payments to make, and the accounting amortization of assets) for Cedar Fair.

Remember that Cedar Fair was competing against private equity firms last year for Paramount Parks with depressed margins, yet FUN was still the top bidder at 9x EBITDA.

So the article was basically suggesting Disney as the one company with a clear path to improving the profitability of a chain that already has healthy operating margins. It's incendiary food for thought, but don't think for a minute that I've lost my mind and think that it will ACTUALLY happen. I do stand by the 6-7 points at the end of the piece, explaining why it would be a good financial move, though.

The only problem is that too many of those parks are regional, with local economies in the dumpster. The only way for Disney to extract value would be to raise revenue---increasing margins seems much less likely, as the operating margin of CFEC' portfolio is already higher than TWDC's parks and resorts.

But, what customers will supply that revenue? The the midwest parks are already trying to squeeze blood from a stone. Knott's is an exception, but already in DLs back yard. PGA is a better bet. Maybe Carowinds and the Toronto park.

To your points:

* The outreach attractions seem to be viewed as inexpensive international plays, not domestic (to avoid brand dilution).

* Music and character IP: has legs in markets where there is still money on the table. Not Sandusky, Cleveland, or Muskegon, though.

* Resort expansion. Not worth doing at the smaller parks (c.f. Geauga Lake hotel) because no one but us nutcases will travel there. Might be a better idea with a second gate at some of the others to encourage higher VPG, but it is already too late to do it the easy way (split dry/wet gates), because many of them are already combined.

* Indoor waterparks. Has legs, especially combined with outreach attractions (and, as wet parks, could lessen the TWDC brand dilution problems.) But, Disney doesn't need CFEC's one property (which is second-rate in its own market) to explore this idea.

* Parrying six flags. Interesting idea, but SFI is probably a long long way off from being a threat, especially at the 10x EBITDA price premium.

* Split the chain. But, which *are* part of the plan? Depending on how you squint, possibly not very many. And, what market do you sell all of the rest of them into? Herschend?

* Technological laggard. I'm there with you, with bells on. Even CP could extract more revenue with a better POS system, etc., despite the lousy economy.

Add it all up, and I'm not sure how compelling it is.

I don't think that has worked out all that poorly just yet. We'll see what happens when the numbers come in at the end of the year. But, I'm guessing higher per-capita and higher operating margins. If so, that's good news.

"If that happened, there'd be an extra large lump in my Huggies. The 2 companies are so different. Cedar Fair parks always make me feel welcome and appreciated. Disney parks make me feel like I need a few more chains attached to my wallet."

Really? I'd say the other way around. Seems like the people at Disney care about their jobs, the guests, and the experiences more than at CP. Oh and prices, I actually find drink prices and some food to be lower than at CP. Bottled water at Disney is $2.00.

Yeah, I've never felt like Disney (or Universal) were out to screw me at all. That's why I've become so price sensitive lately to the Cedar Fair parks.

Then again, maybe Disney feels they don't really need to charge premium prices on their food and drink in park. IMO, they make the big bucks on gifts and souvenirs.

When you go to any "non-Disney" park, how often do you buy souvenirs for the folks back home? When you head to Disney, you come with a pre-written list of what you need to buy for whom. Plus, @ WDW, a lot of people feel they have to buy something from each individual park.

Not that there's any coercion or screwing over going on-- people are glad to spend their money on Disney merchandise. I'm just saying they know they'll get their money selling mouse ears, so they don't need to charge as much for burgers.

Disneey is good at what they do. But it is more family oriented, to a point where you could stay there for days doing everything. Most of these parks in the cedar fair chain would never have the room for the work disney would do to them.

Also thrill rides were never really the disney thing, although they have some of the first cutting edge rides of their time. It just seems or needs to be left alone. No one will come in and buy these parks out, the price would be too substantial. We all know what happens when prices are too high and you pay for parks, you lose out and start going into a selling frenzy. Not like disney couldnt do it, but its not likely.

As far fetched as this might be, I don't like the idea. As someone mentioned, Disney is known for being a unique rarity; owning several more theme parks would just, in my opinion, decrease its popularity. Cedar Point seems too different from Disney, and I think CP is perfectly fine as is. It's the best amusement park in the world, and it's hugely popular. Disney would obviously change some if not all aspects of it, and I would hate to see this happen.