No seriously, I've been talking to the Cedar Fair CFO

But since it's been drilled into our heads that amusements are not a growth industry, would that make sense? The PE firm is already paying a premium to convince people to sell their shares, so that means they'd have to wait for the stock to reach the value that they paid for it, and then wait more for it to go high enough for them to realize a profit adjusted for inflation.

No, there is no stock if they buy it all. It ceases to be a public company once they buy it.

But if the company is privately held, can't they issue an IPO at a later date?

They could, but how long before you can get the company to a state where it would fetch a premium well over what you bought it for, plus whatever additional capital you put into it?

That's exactly what I'm saying. That said, doesn't it make sense for a PE firm to purchase a company that it's going to sit on for years, or in Cedar Fair's case, decades? It's not like there's going to be anything that drives the value of the stock through the roof.

The days of calling regional theme chains "slow growth" are coming to an end. A better term might be "slow decline." Private equity has realized the good stuff...and now is scraping the barrel in a classic case of groupthink. Why anybody would want to take on the headache of running regional amusement parks…given current conditions…is beyond me! There are just so many better ways to earn a buck with less effort…

I certainly hope I’m wrong...

I think you are wrong (not meaning to sound snotty, just responding to your last line). While we've established that amusement parks are not a growth industry, I think there is still room for growth. Amusement parks have proven themselves to be a viable source of entertainment and a large component of the tourism industry so I feel there will always be a demand for them as well as people willing to invest in them. They're not for those that want to make a quick buck but they're much more stable than other industries, especially those relating to entertainment.

*** This post was edited by Rob Ascough 8/3/2007 10:56:53 AM ***

Pure speculation on my part…

I surmise that the regional themers have outgrown their markets. They’ve simply too many attractions to competently meet expectations of the current American citizens.

Expectations that are driven by the instant gratification of the video game (younger generation) and the nostalgic memories (inflated?) that adults hold for the amusement park experience…shaped by Disney-like attention to detail OR years-past abilities to re-ride with nary a wait in line.

This is not a good outlook for even “slow” growth in my opinion. I think that regional themers need to reduce offerings across the board. I think ride-removals will soon outpace new attractions as parks come to grips with economic realities. Along with the needed operational expense reduction will come the obligatory lean years in terms of economic growth.

Current performance (economic) by Cedar Fair and SIX bolster my educated opinion that regional theme parks are not presently a viable money-making venture. Enthusiasts are always optimistic about the next ownership that certainly “gets it.” I do not see any empirical evidence that would suggest enthusiast optimism gels with reality. Snyder et al may certainly be fine businessmen who’ve succeeded in many a venture…but they may have missed the big picture in terms of regionalized parks room for growth. There just isn’t any room utilizing recent strategies.

I could type for pages about what I think needs to be done. I’ve preached much of this before. But the fact is that the cookie-cutter approach utilized by the regional themers has peaked at best…and is on the way down in my opinion. New rides, reduced hours, increased pricing, pay to cut, etc are all dresses on a pig. It does not take a genius to see where the “puck is going” in this business.

You either hop in with Disney and compete grand-scale with multi-themed and re-occurring mega-operational-expense attractions OR you keep it simple and concentrate on manageable attraction numbers which allow for better customer service.

Given the debt load of the two major regional themer chains…I’m guessing the “keep it simple” approach will become more the norm. Unless we want to keep seeing quarterly reports and stock prices that fail to meet expectations...?

There are certain business models that work for certain types of companies. There are far too many variables for me to comprehend and communicate intelligently. Suffice to say…I think regional themers are too big for their markets. The only way I see to intelligently fix this problem is through regression of product. But maybe the next owner who “gets it” will give us more Tweety Birds and 25-cent-cotton-candy to tap into that “room for growth” we always hear about…?

As before…I certainly hope I am wrong!

*** This post was edited by Jeffrey R Smith 8/3/2007 12:35:56 PM ***