Posted Wednesday, January 27, 2010 11:48 AM | Contributed by slithernoggin
A mystery has arisen around the $2.4 billion acquisition of the amusement park operator Cedar Fair by Apollo Management. It began on Jan. 19 when affiliates of the hedge fund firm Q Investments filed a Schedule 13G with the Securities and Exchange Commission reporting a 9.8 percent ownership stake in Cedar Fair. It filed several amendments after that indicating ownership as high as 12%. But what is their play?
Read more from The New York Times.
"But what is their play?"
They want more money...
These sentences from the article pretty much sum up my displeasure with the whole deal.
"I previously raised the issue of Cedar Fairfiling as a “going-private” transaction because of management’sinvolvement and the appearance here that management is timing thisbuyout with a down cycle."
"...this is an uphill battle to win since from the public disclosure CedarFair’s main misdeed is timing the buyout well to the benefit ofmanagement."
They want more money? How does anythig they've done achieve that?
They won't be a mystery for long........
How does anythig they've done achieve that
If they think that the offer price is a gross under-valuation and the target price for the stock is higher, then they kill the deal, hold, and wait for the upside.
That may be what happens but seems like a risky move to me. They do not have enough units at this point to block the sale. So there is a chance that the sale goes through and they lose $1 or so per share/$6-7 million for an investment which does not appear to me to have potential for significant upside (at least not in the near term). They may have more info from other unit holders indicating that the deal is not likely to go through and they may be counting on the bump in price caused by their purchase of a large number of shares recently.
In light of the fact that an unreturned ballot is a "no" vote, I think the sale has a hard time passing even without something like this.
I agree, and there are a lot of pissed off unit holders out there, some of them with a fairly substantial stake in the company, not to mention all of the current and former employees that hold units that look at this deal as a betrayal of trust.
That is all true but there still is a risk that the sale to Apollo gets approved. And if the sale goes through, Q loses 8% or so on its investment in just a few months. Maybe my bigger issue with that risk is that I just do not see the big upside at this point on the investment.
How about if Q is thinking kill the deal, buy units when the price drops, take control of the company for much less than Apollo? Sort of like a hostile takeover.
That makes as much sense as anything I can conceive. I'd guess that units will drop like a rock if the deal fails and that Q is probably the biggest and maybe only reason that the current price is above the offer price.
Then we start worrying about what a complete unknown will do to the parks. :-\ Despite not owning any units, I've watched Kinzel and Co. screw this company up pretty closely in the past several years and I would love to see him out on his ass. Let's face it - he's not going to be in a soup line any time soon, but the Apollo deal just seems too sweet for him and his cronies.
On the other hand, the Apollo deal seems like it offers a pretty good chance for the parks to continue operating without a whole lot of major change. We all know CF parks could use SOME change (food, hotels, infrastructure), but on the whole, they are clean, rides are well operated, and they've got a decent safety record. I'd be scared of a financeer with no background in the industry taking over and screwing things up like the bankers did at Six Flags.
Why would the price of the units fall if the deal is voted down?
Maybe they won't in the case of a no vote by the unitholders themselves - I don't know. But I think when buyouts fall through, you typically see stock prices drop.
The units were at like $8-9 before the Apollo offer. They jumped to just below the offer price right after. Now Q has them trading even higher. Outside of the Apollo offer and the Q activity, I don't see anything else that has happened to warrent the units being $4-5 higher than they were before this started. a month and a half ago.
I just do not see the big upside at this point on the investment
You don't, and I don't, but this guy is still buying units over the offer price, so he must. I'm not even an armchair investor, so he might know something I don't.
Doesn't a limited liability partnership structure greatly reduce the threat of a hostile takeover? I believe there was a failed hostile takeover attempt of Cedar Fair by Anheuser-Busch quite some time ago, and as a result, Cedar Fair became a LLP.
There was never a hostile attempt. What you read was the story in the Cedar Point hardcover book. That story, was exactly that. Augie Busch Jr. spent about 2 weeks with the management in an exchange of ideas. They may have talked sales, but those guys are all dead, and so is the story.
Taft and Marriott made merger offers for Cedar Point in the 1970's, but nothing came of it either, except switching the company to this limited partnership fiasco, and here we are today.
The irony of this, Taft and Marriott never wanted to be in this business for the long term, and they all got out 'when the gettin' was good'. Lets see what Apollo feels when Knoebels erodes Dorney's market, Disneylands' 1 million plus season pass holders suffocate Knott's Berry Farm, and the new Schilitterbahn Kansas City takes market share from World's of Fun.
They do not have enough units at this point to block the sale. So there is a chance that the sale goes through and they lose $1 or so per share...
In addition to Q's no vote, only 21% of other unitholders need to either not vote or vote no and the deal won't be approved. I know where I'd be betting my money.
I does seem like this deal is an uphill battle with the unit holders and has a good chance of not passing. The Apollo deal would be good for the parks, if the deal falls through we have a big unknown of where this company is headed. I hope the Apollo deal is approved.
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