Posted Wednesday, December 30, 2009 3:36 PM | Contributed by Jeff
The family behind Knott's Berry Farm is trying to decide whether they are ready for a complete separation from the historic amusement park the Knotts created and used to run. The family has reservations about the pending sale and is trying to decide how to vote.
Read more from The Sandusky Register.
This is a pretty interesting angle that I wouldn't have thought of. I still have the opinion that strong leadership that has some clue about what it's doing could render the sale unnecessary, even if it is slightly risky.
But clearly it's not just Dick that has to go. So does the board.
Dick IS the Board...for all intents and purposes. I'd be surprised if he has ever been challenged by them, in all honesty.
I mean...his son, with a dubious background...is a GM. And, they don't have a problem with that?
This unfair deal, which only benefits Dick and a few others, can be stopped. In reality, the entire situation is not much different than what happened at Six Flags with a shareholder rising up to force change. There is enough groundswell of anger and frustration out there, the problem is nobody seems to be organizing all of these people together against Kinzel & Co. I guarantee you Dick knows he is in hot water right now and this Apollo deal was yet one more way of insulating himself from losing control of everything.
Does anyone really care enough though to do the work needed to oust the Kinzel & Co. regime?
I wish I was in a situation where $20 million dollars was 'a small pot of money'.
I wish I was in a situation where $20 million dollars was 'a small pot of money'.
That pot is a hell of a lot smaller than it was previously. The family should be ecstatic that they didn't get any more units in the deal (instead of cash) at time of closing.
Seriously though, I see the guy's point. He wants to have a tangible connection to the family's former business, rather than the just the value of the shares.
Just a bit of history here, the Knotts family didn't have a gun to their head to merge with CF. Cedar Point was always in the business for a year-round property, and Florida operations were beyond Bank One's line of credit. However, Knott's had a great operation, but the family had ballooned to the size of many slices of the pie had to feed many family members. That is pretty much it.
Knott's had no real clear plan on what direction to take KBF to. Expand support attractions, like the shops, or that Independence Hall (not sure how or why that was built), or attack the thrill market. Hence, you have more shops, and Ghostrider packed in a small spot. Once those capital projects were cleared, the merger/sale was finalized.
Now, and this is just inside talk among other owners, the Knott's were on the board, and things were peachy. Falfas was sent to the left coast, and the Soak City was built. Everything was rosy, as now the family had their money, and quarterly distribution on 2 million units. At some point several years ago, the Knott's family (probably these 3 in the article) were ousted from CF's board, as the Hunt family was a few years before.
The Knott's family never liked long term debt, and anyone in this industry who knew their operation would agree. Steve was a straight up guy when he was at the park, and has every right to speak up, even though they have only 3.85% of the stock. However, maybe he can spark the other shareholders to also speak up.
The dynamics involved as succeeding generations grow in number and the individuals therein become diluted in terms of "personal investment" almost seem to inevitably lead to impending problems for those family members who do still feel personally attached to the parks bearing their family name(s)...and sometimes the parks themselves.
That was exactly "clear", but it seems almost predictive that the optimum number of family members to be involved in an amusement business is a pretty small number. And while that's kind of sad, it does make those few family-owned/operated parks that are still around only that more special.
(Here's hoping that somehow Carol Albert ends up at Coney in 2010)... :)
I would hold out, if I were the Knotts -- if no more than in the fairly reasonable supposition that they ought to be able to get more out of the deal than what Apollo is offering. In my uninformed vacuum, I can't help but believe that this isn't the best deal that Cedar Fair could get. Maybe it's the best that includes retention of Dick and current management, but maybe not the best if those strings aren't included.
I think that retention is a fantasy anyway.
I think you might be right despite what Dick thinks. See the fourth paragraph in this press release from Claires Stores. Sound familiar?
Then they appointed their own new CEO the day the sale closed as seen here.
I do question whether anyone on that board was looking out for the unitholders. They're a bunch of hand picked "yes" men and have stood by while Kinzel has made one ego-driven stupid decision after another. He overpaid for Geauga Lake without understanding just how bad it was over there. Then he overpaid for Paramount and was probably the only bidder because he had to make his mark. He proceeds to can all the Paramount people and say, "though shalt do things the CP way" in every market nomatter what you've done in the past. Then he makes his son a GM despite his seeming lack of qualifications and seedy past with the company. I'd even go as far as saying some of the recent ride additions at CP (Maverick excluded) have been pretty dumb. Dragster was a fiasco, Wicked Twister was meh, and Shoot the Rapids is about as uninspired of a new ride as I've seen in ages. I like the idea of a flume, but give us something unique. When there are rides like Jurassic Park and Dudleys at IOA, this new flume at CP just seems kind of lame. Is there anything really marketable about it other than, "oh yea we brought back a modern and less inspired version of something we had a few years back?" And how can they say it's a family ride if they don't know the height requirement?
So I'm looking at this a little more closely today. There are about 55 million outstanding shares of Cedar Fair units. The largest institutional holder is Neuberger Berman Group, LLC (with about 5 million shares). The largest indiviual owner is Kinzel, of course, with about 1.2 million shares. (On the inside Falfas is next with about 91 thousand shares.) The Board of Directors (Kinzel excluded) own about 130 thousand shares combined.
You have a few institutional groups that own about 2.5 million shares. (Pioneers Investment, Fairview Capital and Pioneer Equity).
So, if I combine all of those I come up with roughly 9 million shares (or 16% of the outstanding units). So, the 2 million shares that the Knott family owns isn't exactly chump change but if Kinzel has the former group in his pocket already then his battle is nearly won. Of all the other individual owners (like me with my paltry 100 shares) you have to figure that a good number of them aren't following this closely and may not even turn in their proxies.
And, those that do might just opt for the cash payout in what is the current economic climate. I still think it was disrespectful and ignorant for Kinzel not to contact the Knott family but it may not have been necessary if he feels the battle has already been won.
Do you think it's that much of a slam dunk? They need a two-thirds majority, so does that mean in a straight yes versus no vote, or 2/3 yes votes need to be filed?
In that other story posted today, one of the guys filing suit has all of 500-something units. That seems pretty small for someone trying to sue, so perhaps people feel pretty strongly about it.
^I believe it's normally based on 2/3 of the "voting units".
I just had a thought about the importance of coaching in football and how it relates to park management. There's a saying that goes something like "he can take his and beat yours, and then turn around and take yours and beat his" - meaning that a great coach can make the difference between winning and losing when the talent levels are *approximately equal*. In this scenario, envision Kinzel and Shapiro as coaches, and the park line-ups as teams...who do you think would win? That's what I thought too... ;)
Given the givens, I'm guessing CF units are probably "worth" about 12 bucks. Have to wonder where they'd be if Shapiro had been in charge since...the Paramount acquisition...the Knott's acquisition...MiA?
Required vote may be 2/3 of outstanding units rather than 2/3 of units actually voting. If that is the case, a non-vote is the same is a no vote. But you would need to check the merger agreement to see what the required vote is.
I don't think it is a slam dunk...but, how else do you explain that he doesn't reach out to a notable family that holds 2 million shares? The only thing I can guess is that he feels he has the vote locked up through other means.
How do you explain it? This is the guy who doesn't listen to anyone and micromanages. Doesn't seem like a stretch to me. :)
Jeff beat me to it. There might "possibly" be the remote chance that Kinzel couldn't reach out to unitholders directly, in violation of a quiet period or some other constraint. I doubt it, but I'll give him the slightest bit of a break on that. Otherwise it's just hubris beyond measure. (sort of like the god awful portrait of him in torreador pants on the wave Swinger at Knott's.
this whole thing is just the painful culmination of management mistakes on a colossal scale, and we should be hoping that the Private Equity group sees value in the parks, and not the underlying land/etc. I rarely trust PE groups to do anything other than enrich themselves (it's their nature), and normally I couldn't care if the retail/restaurant/hotel chain they buy gets run into the ground. I'm just hoping that this is actually a play to pull these assets out of danger.
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