Second largest Cedar Fair owner also opposes Apollo acquisition

Posted Wednesday, February 3, 2010 1:58 AM | Contributed by Jeff

Neuberger Berman filed a statement with the Securities and Exchange Commission indicating that they oppose the proposed acquisition of Cedar Fair by Apollo. NB indicates that they own 9.6% of the company. The largest unit holder, Q Investments, owns 12% and has also indicated that they intend to vote against the acquisition.

Read all of the SEC filing from Neuberger Berman.

Wednesday, February 3, 2010 2:01 AM

Wow... so that's already 21.6% voting no. That two-thirds yes majority is in serious jeopardy.

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Wednesday, February 3, 2010 2:16 AM

So, only 34% need to vote NO, that is 21.6% plus 3.85% from the Knott's, that equals 25.45% so far.

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Wednesday, February 3, 2010 7:12 AM

Interesting to see another company buying up a crapload of units lately. These guys didn't come out of nowhere like Q did as I believe they've owned a bunch of units for quite some time, but we were having trouble figuring out the exit strategy for Q. I think this complicates it even more.

I'd say the sale is going to be voted down and I think there's going to be a big push from one or a couple (or maybe a joint effort) of these big stakeholders to oust the board and management shortly thereafter.

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Wednesday, February 3, 2010 8:27 AM

Joint was my thought. We know that Q was talking to at least a few other unit holders. I don't think we know who though. Maybe he was "rallying the troops" so to speak.

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Wednesday, February 3, 2010 8:47 AM

It is interesting to compare this to what happened at Disney in the early 80s. The causes of trouble were not identical but there was a lot of talk back then about selling the company and then basically tearing it apart in pieces. Roy Jr, who was on the outs of the company at that point but still influential, gathered up some other powerful shareholders and basically staged a coup.

They went out and got Eisner and Wells and brought them into the company because they had had enough of the existing leadership. You could argue that the company wasn't in dire straits at that point but there was no real growth and there was the threat of a hostile takeover to be sure.

Eisner and Wells came in with a fresh perspective and the Disney Decade was born, taking WDW from two parks to four parks, the massive hotel investment, embracing the VCR culture but marketing their "Classics", etc.

I simply don't support this sale because I don't think the company as it is has been given a fair chance under the current leadership. The Board of Directors is an obvious part of the problem because there seems to have been no challenge to Dick's leadership over the past...well...ever.

The thing about taking opportunities is that there is risk involved. Yes, it can be scary for some to try and picture Cedar Fair operating without Kinzel at the helm. But, let's be honest. He has to go at some point. Why not now when there is legitimate concern about his decision making?

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Wednesday, February 3, 2010 9:31 AM

This is looking to be very cool. I want to see change at CP, but I don't want to see them sold off. Plus, I would love to see Dick K. forced out of the company, as I view his recent actions as a betrayal of trust as far as the unit holders are concerned.

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Wednesday, February 3, 2010 12:16 PM

Interesting, and for all who are excited about the deal being voted down, I would ask you, then what?

I agree Kinzel should go, should have gone a long time ago. However, let's say the deal doesn't happen. Then What?

Debt still due, economy still sucks (Especially in Northern Ohio, Michigan and Eastern Indiana). This isn't like they are selling to the low bidder at the expense of (or ignoring) other offers, with white knights, rainbows and ponies. This appears to be the only one.

So............back to square one, with a very long uphill slog to go.

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Wednesday, February 3, 2010 12:34 PM

I'm not sure anyone here really knows. I think some of us are hoping that Q and maybe Berman have plans that would be better than the current option. I have not heard anyone here say they thought the current plan was a good one.

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Wednesday, February 3, 2010 1:42 PM

CreditWh0re said:

Debt still due, economy still sucks (Especially in Northern Ohio, Michigan and Eastern Indiana). This isn't like they are selling to the low bidder at the expense of (or ignoring) other offers, with white knights, rainbows and ponies. This appears to be the only one.

So............back to square one, with a very long uphill slog to go.

That's the point I made in the podcast, too. The biggest problem with CF right now is financial due to the debt and bad market. That's not going to change no matter what happens in leadership. Unless they can find someone with deep pockets to take over, nothing is going to change in CF's financial outlook for quite some time.

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Wednesday, February 3, 2010 4:11 PM

Yeah, I see two issues in that area. The first is that perhaps they could have achieved better results and a higher level of debt servicing under different leadership. True or not, it probably doesn't mean a hill of beans difference going forward.

The other question is what the effect would be going forward under different leadership, and whether or not it's simply too late. That's a pretty hard question to address. If it's too late, then allowing for the acquisition is the right thing to do.

But these cats seem to think there's more value than $11.50. I'd love to know how they believe they can get there. The sad thing is that the separation fee they'll have to pay might have been better spent years ago attracting top notch rock stars to run the place.

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Wednesday, February 3, 2010 4:12 PM

Looks like a hostile takeover to me, but I know very little about this sort of thing.

Is Chapter 11 an option at this point?

-Sam

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Wednesday, February 3, 2010 8:49 PM

CF hasn't defaulted on anything. No chapter 11.

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Wednesday, February 3, 2010 11:26 PM

CreditWh0re said:
Interesting, and for all who are excited about the deal being voted down, I would ask you, then what?

I agree Kinzel should go, should have gone a long time ago. However, let's say the deal doesn't happen. Then What?

Debt still due, economy still sucks (Especially in Northern Ohio, Michigan and Eastern Indiana). This isn't like they are selling to the low bidder at the expense of (or ignoring) other offers, with white knights, rainbows and ponies. This appears to be the only one.

So............back to square one, with a very long uphill slog to go.

And if the deal does go through, then what? Apollo is going to play Daddy Warbucks and pay all the bills while Kinzel sings "the sun'll come out tomorrow?" And operational and financial decisions can be made just as they have been for the past 20 years with no consequences.

At this point, $11.50 is closer to $0 for me than the value of what I paid for the units plus all those purchased through reinvestments (in the 20-30 dollar range). I'll take that $0 if it means tearing a hole in the golden parachutes.

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Thursday, February 4, 2010 12:36 AM

^Thanks for the segue. ;)

The interesting question to me is this: "At what price would the community of investors welcome Apollo (or some other investment company that is not an amusement operator) with open arms and accept the offer?" I have to guess right now it would probably be in the 15 dollar range...but I have nothing at stake in CF, and only lost a couple hunder SF shares that were virtually worthless when we bought them as a lark...

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Friday, February 5, 2010 1:28 AM

I'm surprised that no one has considered that Q may be convinced Cedar Fair is worth more hacked up into pieces than it is as a whole.

Sure this may resemble what one would consider a hostile takeover, but is it out of the realm to consider Q may have a grimy ulterior motive?

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Friday, February 5, 2010 8:59 AM

Are you implying they could sell each property individually in this market? I have a hard time believing that would take place, considering they couldn't solicit any serious bids for ValleyFair and World's Of Fun.

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Friday, February 5, 2010 12:21 PM

Yeah, I don't think there's any end game there that gets the investor to a positive place.

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Friday, February 5, 2010 1:39 PM

Cypr3ss187 said:
I'm surprised that no one has considered that Q may be convinced Cedar Fair is worth more hacked up into pieces than it is as a whole.

Sure this may resemble what one would consider a hostile takeover, but is it out of the realm to consider Q may have a grimy ulterior motive?

Can you say with certainty that Apollo isn't convinced of that either?

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Friday, February 5, 2010 1:55 PM

The only endgame that gets unitholders into positive territory involves the company either being sold for more than the current trading value, or for the company to turn around significantly. Either is possible, but neither is particularly likely in the short term.

What is particularly unusual about Cedar Fair is that a large number of the investors in the company seem to be invested for the long term...although I can't see where that would apply to either of these newcomer majority unitholders.

--Dave Althoff, Jr.

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