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.

Friday, February 5, 2010 3:19 PM

Dave, Neuberger Berman isn't a new unitholder. They've been listed as a major holder since I've owned units. It looks like they're recently adding to their stake, as I don't recall them owning 9% before.

gator, you may be in the right range there. Everybody understands that stock prices go up and down, and you can't realistically expect not to lose something once in a while. But if you look at long term pricing or even the 200-day moving average for FUN, it hovers around $11. The only recent drop was when they announced suspension of the dividend. And they announced the proposed sale while the units were in that "ditch." The premium they're offering puts the sale price right around, or even slightly lower than, where they were selling most of the summer.

My suggestion is that the sale price be based on a premium (28% I believe) above the price of the units the day before it was announced the dividends were being suspended. That's more in line with the actual performance of the units, and not based on one blip in the scheme of things.

A number of financial pundits have questioned the timing of the various moves, so it's not just complaints by whiny unitholders. The idea that Kinzel and crew would continue to hold their present positions under Apollo, along with generous compensation packages, makes one wonder who they're truly beholden to, their current unitholders or their future bosses.

Friday, February 5, 2010 3:27 PM

I was aware that Neuberger Berman wasn't a new unitholder...but they are only just now a *major* unitholder. I know, I did not make it at all clear that by "newcomer" I was referring to the size of their stake, less to than the length of time they have been invested in FUN. I tend to think they fit in with the "long term investor" group. That still makes you wonder about Q, though.

But the fact that there are large investors increasing their stakes in Cedar Fair at a price well above the sale price does seem to suggest that they see a significant upside for the company at least in the long-term future. Makes you wonder what they know that nobody else does. If shares were still $11 I'd say they know a good deal when they see it. But they're paying $12, which means they expect to get at least that much out of it...

--Dave Althoff, Jr.

Saturday, February 6, 2010 1:34 PM

The problem with the "chop it up" idea is that, for the most part, the land these parks sit on is relatively cheap---the major exceptions being Knott's, Great America, and maybe Cedar Point, though even that is a little dubious, as the broader real estate market in the area is seriously depressed, it's not really a place you'd want to be year-round, and only the waterfront is really worth something. Perhaps you could make an argument for Canada's Wonderland, too, as Toronto continues to expand. I'm not sure selling off the Geauga land has been all that successful, for example.

So, for the most part, that leaves the value of the assets as theme parks, not as land. And, right now, who the heck is buying more theme parks? Six Flags is bankrupt. Blackstone/Merlin probably isn't able to buy even more after the Busch acquisition and planned Legoland-FL construction. Busch/InBev has left the market. Universal/Vivendi has left the market. Disney wouldn't be interested. That leaves Parques Reunidos, some other non-US firm (Compagnie des Alpes) or the "family" players like Herschend, the Kochs, etc. Not exactly a sellers' market.

Last edited by Brian Noble, Saturday, February 6, 2010 1:38 PM
Sunday, February 7, 2010 1:14 AM

The land that Wonderland is currently situated on is easily the most valuable of the chain. Perhaps Great America would be a close third after Knott's.

I'm still not convinced that the chopping block is out of the realm of possibility once the horizon is a bit brighter. Just because fish didn't hit the bait one day does not mean you should stop fishing.

I'm currently employed indirectly by a firm that has flipped several amusement parks in the past. (Idlewood, Kennywood) Q investments would not need to worry about restructuring debt and could infuse the money needed to make all obligations and then some. With the "then some" being the capital to run the parks for a few years.

Landing these parks back on their feet would make them very attractive acquisitions for some folks with deep pockets.

Edit: Depending on how bad the 49rs want to play ball in a new stadium may make Great America the most valuable with Wonderland a close second. :)

As far as selling operational parks go, I would imagine Wonderland takes the cake there as well, if you were looking for ROI that is.

Last edited by Cypr3ss187, Sunday, February 7, 2010 1:21 AM
Sunday, February 7, 2010 2:18 AM

I doubt the lease for Great America is valuable, especially if I recall correctly that it requires an amusement park to be operated on it.

Sunday, February 7, 2010 2:28 AM

Jeff, you are right, I apparently had a lapse and forgot Great America was leased. You though, are assuming that Cedar Fair isn't holding the land hostage if you will.

From a legal standpoint I imagine they could tie things up in litigation until you are a grandfather. It's obvious they have little interest in operating the park, they are making things difficult for a premium, a premium I would be willing to bet they get. That of course is depending on how bad they want to build a stadium.

Sunday, February 7, 2010 3:06 AM

Premium for what? You don't make property difficult to sell when you don't want it.

Sunday, February 7, 2010 3:31 AM

Well... I don't think they are losing money on the park.

As you pointed out it's not their land to sell, but surely they are asking a 'premium' price to step aside. I'm not sure anyone could argue otherwise.

If they were not to exploit the situation to it's maximum potential they would be morons. Surely I can not be the only one to see that the Stadium proposal is stuck between a rock and a hard place. That hard place is Cedar Fair.

Sure they may not "want" the property, but holding onto it surely is not hurting them financially.

I take it you are a mediocre chess player? :)

Sunday, February 7, 2010 12:56 PM

That park didn't make money when it was under Paramount. Cedar Fair would take whatever out it could get. I don't understand how that's "premium" anything. There's nothing to exploit. The whole affair with the 49ers is being leveraged to make money (since they have the lease on the stadium site) or to sell the park at fair market value.

Wednesday, February 10, 2010 12:15 AM

Sorry I'm so inconsistent with my replies and I'm sure it is ages in the forum world. My work schedule has been horrendous over the last week.

I guess that what I'm getting at is that any price would be a premium over what the market value may be. As you pointed out "it's being leveraged to make money" which is better than their best case scenario should they have to unload that park through alternative means.

As far as fair market value goes, I'm not sure it exists at this point given the properties recent history. Being difficult can and will fetch them what I would consider to be premium compensation if you will.

I'm not saying that you are wrong nor I am right. I think you are failing to see the alternative to my argument. What I mean by that is that this stadium proposal is a blessing in disguise for Cedar Fair. I'm saying anything that they can get at this point is a premium.

Last edited by Cypr3ss187, Wednesday, February 10, 2010 12:17 AM

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