Major Cedar Fair unit holder will vote no on Apollo sale

Posted Friday, January 22, 2010 12:17 PM | Contributed by Jeff

The $11.50-a-share offer made in December is not indicative of the true value of the company, said shareholder Q Funding III, L.P, which owns 9.8 percent of the outstanding units of Cedar Fair, and will therefore vote against the sale. Two-thirds of unitholders have to vote in favor of the deal for it to pass.

Read more from Reuters.

UPDATED: More from The Plain Dealer.

Friday, January 22, 2010 12:58 PM

Nail, meet coffin.

Friday, January 22, 2010 1:52 PM

Should that say coffin, meet nail? In any event, I'm not sure this is the death blow but it certainly makes it unlikely. I'm not sure they would have had enough response to make the sale happen anyway.

Friday, January 22, 2010 3:12 PM

Big spike today in the unit price, up to $13 now.

If this fails, I'm really anxious to see what happens. The message I'm getting is that either: a) this big stake holder won't settle for the price or b) they believe the company doesn't need what amounts to a bailout to solve its debt issues. Maybe both. But if the deal fails, what next? Do they have enough influence to replace the board and executives? I think that's what a lot of us small investors are wishing for.

Friday, January 22, 2010 3:22 PM

The thing that sucks, is if this does fail (which I hope it does) Apollo will get money for it not passing. Almost makes you wonder if that was the plan all along.

"If the deal falls through, Cedar Fair will have to pay Apollo a “breakup fee” of about $19.5 million. The size of that fee falls to $11.4 million if the agreement falls apart during the go-shop period through Jan. 25, when Cedar Fair can consider other offers."

Friday, January 22, 2010 3:26 PM

Which brings me to the question I have in the back of my mind...

Just who is buying shares of FUN at $13 knowing that if the sale goes through they will only be worth $11.50? Is it possible that someone is quietly aggregating shares specifically to block the sale, or possibly even to try and launch the kind of shareholder revolt that some here have talked about? Or perhaps even only to try and extract a better offer out of Apollo?

It's pure speculation on my part. I still directly own 0 shares of Cedar Fair, and until about a month ago I paid little or no attention to how these merger and acquisition things worked, so maybe the behavior of the share price is "normal"...

Wait a minute...these guys own 9.8% of outstanding shares? I thought the Knott family was the largest shareholder with 2% of outstanding shares...

(user actually reads the linked article from the Plain Dealer)

...Wow. I think I just got at least part of the answer to my question. Siddur Holdings, meet Q Funding III, which is building an equity stake in the company the old fashioned way...

--Dave Althoff, Jr.

Friday, January 22, 2010 3:50 PM

I think what was said is that the Knotts own two million units. Exactly how many units are there total?

Last edited by Dutchman, Friday, January 22, 2010 3:51 PM
Friday, January 22, 2010 3:52 PM

One of my friends just brought up an interesting idea, although I'm not sure I'm inclined to believe it, yet. What if this Q Funding III is a front of Apollo?

There's no doubt they've been following the news and feeling the intense negative heat from unitholders, but would they really go so far to buy up almost 10% of the units thereby driving up the price? Half of it makes some sense, the other half...not so much.

Time to do some digging.

On second thought, that falls on its face, because Q opposes the sale. Eh, still possibly worth throwing out there.

Last edited by maXairMike, Friday, January 22, 2010 3:58 PM
Friday, January 22, 2010 4:29 PM

There are about 55 million outstanding units. At a sale price of $2.4B and a unit sell price of $11.5, I would think there are about 208,700,000 total units. Meaning that 153,700,000 are owned. 2 million units would only be about 1.3% of the currently owned units.

Last edited by Jason Hammond, Friday, January 22, 2010 4:30 PM
Friday, January 22, 2010 4:46 PM

Hmmm...Q Funding III is a unit of Q Investments, LP, Don't expect to find out much more from their website, though, as virtually everything on it is password protected.

--Dave Althoff, Jr.

Friday, January 22, 2010 4:48 PM

I've been nosing around in EDGAR and on the Texas gov. website. Couldn't find the information I was hoping for from a quick cursory search of the Texas website, although I did find 5 listings for the name "Q Funding." One was our Q Funding III LP with absolutely no information, two were results for a Q Funding 5 LP at the same address in Austin, one was Q Funding LLC in Dallas, and the other was simply Q Funding LP. No real results from that search other than that list of names.

However, after looking at one SEC filing in EDGAR (an SC 13G), the Name of Reporting Person on the filing was rather interesting...Amalgamated Gadget LP, of Fort Worth, TX. It was of course a report for the transfer of 9.8% of CF units (5,434,179 to be exact). I'm still reading through the first SC 13 (this one filed on Tues.) , but there is another one that was filed on Wed. as well that I have yet to read through. Here's a link to the one I'm currently working through. Some interesting things in there.

EDIT: The man behind Q Funding III, Q Funding, Amalgamated, as well as other investment fronts is one Geoffrey Gaynor. Things are starting to seem a little interesting. Why is a seemingly random investment person from Texas purchasing a 9.8% stake (at least, could end up being more) in CF, driving the price up like this? No ties to Apollo appear to be there based upon what I've found so far, so there's something else going on here.

Last edited by maXairMike, Friday, January 22, 2010 4:59 PM
Friday, January 22, 2010 6:27 PM

Jason Hammond said:
There are about 55 million outstanding units. At a sale price of $2.4B and a unit sell price of $11.5, I would think there are about 208,700,000 total units. Meaning that 153,700,000 are owned. 2 million units would only be about 1.3% of the currently owned units.

I think you are confusing the numbers. $2.4 billion is the total transaction price which includes the assumption/refinance of existing CF debt. The $11.50/unit price is the cash being paid out to unitholders (basically the $2.4 billion purchase price net of the CF debt). I understand that CF has about 55 million units outstanding.

Friday, January 22, 2010 10:12 PM

Oh yeah, i forgot about the debt.

Friday, January 22, 2010 10:30 PM

You may need, in some capacity the Knott's and the Hunt's to come out from behind the bushes with checkbooks in hand. Combined, they have a 'percentage'. Not enough to take their parks back. But, they have enough to say "NO", and if these institutions with blocks of units see some folks with the experience and guidance to get seats back on the board, its a brand new ball game in Sandusky.

If Cedar Fair was so concerned about the word 'debt', they should have thought twice before continually building $20 million hypers recently in their parks. They could have still been the darlings of the industry with $6 million dollar woodies, flat rides, and family attractions.

If you want to see the board replaced, there are not a lot of folks that can effectively manage a company that large, so you will need assistance, ie the Knotts or Hunt's again to go public and demand change.

Friday, January 22, 2010 10:39 PM

Some info on the units. First one shows today's activity (1/22). Big spike in price just before 3PM to around 3:30 corresponding with some big purchasing (green lines). Then a sharp drop corresponding with a lot of sales (red lines). Market cap increased by nearly 25 million, with nearly 2 million shares traded.

This lists the major holders of CF units; institutions, funds, and individuals.

Finally, an article from the Toledo Blade. (Interesting they use the same picture as the story about Demon Drop moving to Dorney.)

"According to news reports from Dallas, Mr.Raynor's holdings have been estimated at $4 billion, and he has beennoted for taking extraordinary stakes in distressed companies. In 2001, for example, he bought an 8 percent stake in Continental Airlines just 9 days after the Sept. 11 terrorist attacks."

Saturday, January 23, 2010 7:02 PM

There's the reason the unit price is where it is!

There doesn't appear to be a lot of information on this cat, but I'm guessing this is simply a passive arbitrage opportunity on a big volume play. But, maybe this guy wants to effect some change on the board. It's effectively the end of the merger. You have to wonder now if CF bails during this time to save some $$$ on the separation fee.


Sunday, January 24, 2010 1:36 AM

I think it's as simple as Raynor sees Cedar Fair as a great bargain...but he is obviously gambling that the sale falls through. So he buys enough units that he can make that (fail to) happen. Then what? Well, he certainly has a target as to what he thinks the units are worth, at which point he bails and takes his money.

Personally, I think he's right. First, the company has historically made money and until recently has had a ridiculous dividend payout. Lots of the current investors paid double what their units are now worth, and...quite frankly, both the makeup of the shareholder base and the company itself are more than a little bit unusual. If he understands what the company is about, and if the company does what it has planned to do, he stands to make a lot of money, but not necessarily in the extreme short term.

One of the articles I read indicated that this is the guy who bought a huge stake in Continental Airlines in late 2001 when everybody else was dropping airlines like crazy...and I guess that gamble did, in fact, pay off for him. His specialty seems to be seeing the real value of undervalued companies.

I just think this whole thing is interesting.

--Dave Althoff, Jr.


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