Facing mounting losses and declining attendance, Six Flags wants to reduce its $2.1 billion in debt by selling parks in Buffalo, N.Y.; Denver; Seattle; Houston; and Concord, Calif., in addition to Magic Mountain.
I guess we investors can either sell or ride the wave. How many others own stock?
That is a sad basis for selling off a park that is making you money when you are 2 billion in debt. I think he is pushing the "family" angle a little too much.
If there is such a big problem with teenagers at the park, hire more security and maybe have a curfue for teens in the park without there parents.
Sfmm, and six flags nj(forgot the park initials) are the 2 flagship parks for six flags. By selling off one of the biggest money makers you have, that is not going to help pay off your debt that will continue to grow without the park.
I love history.
Maybe the board should find a CEO that would be able to guide the chain through their transition and not look at doing quick fixes that would permanently damage the chain's ability to earn money over the long term.
Let's not jump the gun here. Perhaps they will just sell some of the land around the Mountain. FWIW, they look like they are putting in some sort of shopping center or something across MM Pkway from the front gate.
SFMM could definitely use some work, though. They have some old stuff sitting around the park that's not being utilized, such as the monorail and Orient Express. They have a lack of flats as well. What they should do is kick maintenance into high gear, add another children's area, along with some flats, and combine SFMM with SFHH. SFGam is doing well--perhaps they can use that as a pattern for SFMM (included waterpark, more than one kids area, more flats).
That's not what he's saying at all. What he's saying is that the park, as it stands today, does not fit within the bounds of the company's strategy. They're redefining their customer, which is a radical and risky thing to do. It's also the right thing to do, if you ask me.
Selling the park seems a bit too radical to me, but in a market the size of LA, they probably are starting to think about how the brand is perceived. If the comments on this site are any indication, the brand suffers a lot at the hands of Magic Mountain.
Not sure I get how you'd want to give up a park like Darien Lake though, which doesn't have significant competition. No idea how it is viewed in Buffalo, and what kind of numbers they see.
Now assume that they can sell the park's land for similar per-acre price as they sold the Astroworld site (and that's probably a pretty low estimate considering the land price differences between Houston and LA), but based on those numbers they could sell the MM land for $175-200M. $200M dollars today is worth a lot more than $200M over eight years (which is the approximate time it would take to earn the same amount in operating income). So, I can definitely see how that would make sense from a business standpoint...emotional feelings about the park itself set aside.
Or, assuming they could sell the park as is for a similar multiple (10.7 X EBITDA) as CBS sold Paramount Parks, SFMM itself could bring in around $250M. Either way, there's a lot greater potential current value in divesting the park than there is in keeping it operating as a SF.
They've announced that their goal is to get their debt down to around $1.6B (which, will actually be less than CF's...even after the announced equity offering). They are going to need some "big bangs" to make that happen. (Selling Wyandot Lake or other small properties for $2M a pop just isn't going to cut it...)
Sfmm, and six flags nj(forgot the park initials) are the 2 flagship parks for six flags.
Look at the numbers (specifically, look at attendance vs operating days per year). The only thing that backs up the "SFMM is a flagship" argument is the fact that the former management constantly screamed that. The park's piss poor attendance speaks for itself.
What a complete turn around two companies are facing at the same time. Cedar Fair grew it's holdings smartly, with due diligence, etc. Six Flags bought up parks like bottled water before a hurricane. Six Flags threw coasters up like they were pennants. Cedar Fair made slow, precise captial investments each year concentrating on all areas of their business and not just coasters.
Now look at the corner these two companies are turning. I would say it is amazing but the writing was on the wall back in the mid-90s.
"Magic Mountain attracts 2.5 million to 3 million guests a year and is considered a profitable property, said John Cora, a theme park consultant and CEO of Palace Entertainment, which owns Raging Waters in San Dimas and the Boomer's chain of family entertainment centers."
That ranks MM as 2nd or 3rd any given year. If they sell of MM, they lose chain wide a huge chunk of their admissions! Which park in the chain could compensate for that loss?
Even if they cleared 300 or 500 million off a complete sale, the debt drops to 1.8/6 billion, and they also lose a profitable park in the process. They can't pay off the remainder of the debt with less money coming in. The CFO (ex Euro Disney guy) should figure out a way to refinance the debt.
I don't think Shaprio's ideas are universally flawed, but the execution of them, the travel expenses promoting the parks as family friendly and the insulting message to teens that they are not welcome, have clearly backfired. It would have been a better solution to actually place value on the customers they had while pursuing other demographics.
$2 billion in debt is a lot to erase. You're not going to erase it by continuing to dump $20 million rides into an underperforming park.
Amusement parks aren't charities open for the good of the public. They're businesses, and they need to be profitable.
Here are some fun facts:
-Divide the park's attendance by the number of operating days each year to get an "average per day attendance" figure.
SFGAm: 20,500ppd (people per day)
So SFMM basically performs at the same level as SFEG. That's really great for a park three times that big with a significantly larger operating budget. I don't care what some consultant at another park says. Those numbers are dismal!
Add to this the fact that this land is much more valuable as mixed use and this decision is a no-brainer. I see no way anybody steps up to save this place from becoming a shopping mall or like.
P.S. I could go into the reasons that it would be almost impossible...especially in California, to clean up the place, but I'm in no mood for battle. I'll let somebody else take that heat...
P.P.S. The demise of this park falls on prior ownership. The fact that they let this place get the reputation it so rightfully deserves is a tragdy of epic proportions. This indeed proves that customer loyalty has limits...even in something that seems so inelastic like top line roller coasters! People...especially grown-ups who spend their own money...will only take so much crap before they decide to go elsewhere.
I have felt saddened at the loss of every park and every coaster that has ever went away. As for SFMM...good riddance! I can only hope it comes sooner rather than later...
*** This post was edited by Jeffrey R Smith 6/23/2006 3:31:51 PM ***
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