SeaWorld Entertainment makes unsolicited $3.4 billion bid to buy Cedar Fair

In today’s news, Centerbridge Capital, a private equity firm (unrelated to the group that owns SEAS) announced that they hold >5% of FUN. They are the group that controls Great Wolf Lodge

It certainly seems like PE is eyeing FUN which can’t be good for any of us

I've worked for PE-owned companies. It didn't end well. Great Wolf has done some stupid things under PE influence (and definitely under Scott Ross influence).

PE is usually short term focused with the intent to flip the asset. That doesn’t bode well for long term stability, growth etc

Oh yes, while they tell everyone they want to build up something durable, until they need to cut expenses to look better during diligence before the sale.

That has been Sea World's MO for the past several years. Ironic that they are the ones making the offer to buy now, presumably because their efforts to attract a buyer for their assets has been in vain.

FUN has spent the trading day (up until this point in any event) above $60. Board isn't approving the deal as proposed if that continues.

I'm intrigued why there is so much interest specifically in Cedar Fair from these other operators. Is it simply the allure of a stable, well established lineup of parks? Or something else on the business side that is particularly appealing?

GoBucks89 said:

FUN has spent the trading day (up until this point in any event) above $60. Board isn't approving the deal as proposed if that continues.

I would like CED23 to weigh in with his thoughts:)

Not sure there are a lot of options. Its basically SeaWorld, Six Flags and Cedar Fair. Independent parks aren't big enough to attract a lot of attention.

The only others I can even think of are Herschend or Reunidos' US operations.

GoBucks89 said:

FUN has spent the trading day (up until this point in any event) above $60. Board isn't approving the deal as proposed if that continues.

In your opinion, what does this PE firm move mean in terms of likelihood of a sale?

From what I have read, the goal is to purposely jack up the price via a bidding war so the payout is bigger for shareholders. This makes sense if there is a sale, but if there isn't is buying into Cedar Fair so deeply just a calculated risk?

The silence from Cedar Fair seems odd to me if they did not want to sell. But maybe it's not?

I'd say there's a lot of analysis that goes into it and it's a big decision to make that affects a lot of people, but the longer it goes on, the more worried I get that a merger is going to happen in one form or another. The higher the price goes, the better for existing CF unitholders, but the more likely that the combined entity will probably end up being so debt constrained and poorly run and the parks will suffer because of it and in a few years, the company will be bankrupt with someone else buying it up for a fraction of what it was worth today. I hope I'm too pessimistic. The only thing that gives me hope is the transaction requires a 2/3rds vote of all unitholders which isn't an easy hurdle, but if the offer is high enough, many of them can be bought, the future of our beloved parks be damned.

You mean, like SEAS has been ever since InBev came along?

I don't know what to make of it. It reminds me of the Apollo days, when an unheard of investor came along apparently for the express purpose of quashing the sale. Or maybe Centerbridge just sees an opportunity to make a few bucks...everybody seems to agree that SEAS offer is too low, and the unit price is rising above the offer, that alone is an opportunity to cash out for some investors, no buyout needed.

I just kind of wonder what their motive is, and if they have an opinion on whether FUN and SEAS should combine.

I also think it interesting that all the financial pundits seem to think *any* merger with FUN, whether with SEAS or SIX, would be a good idea, while just about everybody who knows anything about the products produced by the respective companies thinks it would be a very bad idea. I guess finance people have forgotten that competition is a good thing...

--Dave Althoff, Jr.

You're right. By all accounts, they've been cutting corners in their parks for the past several years. I don't have a ton of first hand experience aside from an absolutely awful visit to Busch Gardens Williamsburg last April. It was COVID times so I wasn't expecting full blown perfection, but they had literally one large restaurant open with a 45 minute wait to get in the door and then another 20-30 once you were in there. The food wasn't as good as I remember either. Alpengeist, and Lochness Monster sat closed the entire day while other rides ran at less than full capacity and had long lines. Couldn't even complete one lap of the park to hit the major rides that were open before the early 6PM closing time. InvadR, built I believe the same year by the same company as Mystic Timbers, felt like it was trying to jackhammer our teeth out. It was like the place went from being one of my absolute favorite parks in the world to being Six Flags Darien Lake around the early 2000s or something. I LOVED going to BGW in the 90's and 2000's. I loved Sea World Orlando about 5 years ago. I've always been to Busch Tampa when it felt like they were in offseason mode so that one never impressed me that much although I do like their ride lineup.

Seems to me that financial pundits are in favor of just about any deal that can get done in any industry. It's in their interest to talk up any drama going on whether they think it's going to end well or not. They don't care. Either way they have something to talk about. That's their thing. If it ends up being a slow train wreck for the stock/bond holders and the customers of the business as most people here think this deal would be, they can talk about what went wrong.

It hurts my heart to think of parks like Cedar Point, Kings Island and Knott's under the current SEAS ownership and operations.

When the company was spun off as its own public company, with Blackstone having a large controlling interest, things were pretty normal. I was there for a year of that. The company had its old leadership, and I think they were a little lost without the reliance on the corporate parent (AB then InBev provided a lot of support in IT and finance). But it was otherwise business as usual, which still meant spotty operations in some parks, and not a lot of growth potential outside of an eventual second Sesame Street park.

Hill Path is where it went to ****, with experienced executives unable to actually run the company. Manby and even the Carnival guy probably could have done very well, if Ross and the board didn't have them on a short leash. Purely from an asset perspective, the company has great properties with wonderful toys.

I never had a bad experience at SWO, operations/ride closure wise. But we were just in San Diego, and while the park was nice... My god... Everything was closed. Multiple animal exhibits, both Manta/Atlantis on both days we were there (which was a bummer, wanted to ride Manta quite a bit!). I know this is the off-season and I can understand 1-train ops or something, but it was a bummer none-the-less.

Park was clean/spotless though (what is with that park and every ride being the exact same color combo, though? Including the new dive coaster).

Maybe next time!

Our SeaWorld isn't awful ops wise compared to BGT or your San Diego experience. But the one train ops on weekdays for Mako, Manta & Kraken regardless of crowd size since reopening from COVID has been annoying. Or when Kraken was scheduled to be closed for painting on New Year's week in Orlando. Or BGT right now having Montu, Sheikra and the log flume all down for refurbishment while Iron Gwazi still isn't available to the public.

We must luck out, I don't recall ever coming across Mako running 1 train, even when walk on. Maybe once, but again, being walk on it didn't even matter and they allowed re-rides, too!

Would be frustrating when actually busy though.

Since I became a passholder again in November with the Black Friday deal it's been every visit. And I have yet to see Mako, Kraken, and Manta all open on the same day since then as well. (Which, to be fair, is in part due to Kraken's extended downtime to get its new Riddlers Revenge paint job)