Unit holders reject Q proposal for Cedar Fair board nomination process changes

If you vote no you should expect a lawsuit via mail any day now.

What does that even mean?

Why did it need 80% approval to pass? Not that I have an opinion on the issue. It's just that 80% seems high.

Jeff said:
What does that even mean?

Oh come on, that's an obvious jab at Q.

I seriously think Q just likes having meetings.

No, the post didn't make sense. If I'm a unit holder and vote no, why would anyone sue me?

I honestly think it was a sarcastic joke about Q's sue-happy tendencies. It doesn't make sense...that's the point.

Bingo

Count me in as not understanding why it needed to reach an 80% thresh hold. I'm not sure you could get 80% of people to agree to accept $1,000 cash because at least 20% of the people would likely be suspicious and say no.

And, I'll also admit that I didn't see anything when voting that told me that it had to meet an 80% threshhold.

Supermajority voting requirements are pretty common in organizational documents for various entities. Typically you see voting thresholds split out in majority vote for some matters, supermajority for some matters and unanimity for other matters. In large organizations, the number of matters than require 100% votes tends to be very small (often times none) because of the difficulty getting everyone to agree on anything.

The idea behind supermajority requirements is that you want to make it more difficult to amend the documents (at least with respect to certain issues). One, it can be difficult to operate when your core documents are being amended on a regular basis. Two, it helps preserve the status quo in terms of expectations folks had when they joined the organization.

I suspect that very few individual investors in Cedar Fair have ever read the partnership agreement. There are many large/institutional investors who I suspect have not read it as well. Though I expect that Q Funding did read it (or had their attorneys read it) before they started accumulating units. But the language is apparently there requiring a supermajority vote so folks can raise the claim that they relied on that requirement when they invested.

Its interesting to see that the vote to sell the entire company to Apollo required a 2/3rd supermajority vote but allowing unitholders to nominate candidates for the board required 4/5ths supermajority. The former is certainly much more substantial/significant than the latter but the required voting threshold doesn't indicate that. Higher threshold may be intentional. Or it may be an accident of drafting where sections of the partnership agreement that were subject to the higher standard were not parsed out in terms of what actually should require the higher vote (so that all of a given section in the agreement was tagged with the higher voting threshold rather than just parts of it). Management may also have wanted to the supermajority vote to help it keep power.

If you are in a homeowners'/condo association, you probably have a supermajority voting requirement to amendment the charter/restrictive documents (2/3rd majority is the most common I have seen). Constitution requires 3/4ths of the states to ratify amendments.

Supermajority voting requirements put a premium on getting the documents right the first time. You have to balance the benefits of consistency with the ability to make changes as needed going forward. But having a poorly drafted document with a supermajority voting requirement to amend can be a disaster.

The first post was in fact an attempt at humor.

I figured a lawsuit would heading in someone's direction and since they already sued CF on this issue that left unit holders.

My 2nd choice was - If you voted no you should expect a poorly written letter any day now.

jive2 said:
If you voted no you should expect a poorly written letter any day now.

Written in crayon. On construction paper.

Good post GoBucks. There certainly does seem to be a contradiction in the majority requirements of those two seemingly far different matters.

What I find really odd is that the second of the two proposals did meet the 80% threshhold. That certainly makes me believe they had to be pretty close on the first proposal. I'd be willing to bet that is the next issue Q will be going after.

The proposals had different required thresholds. The first required 80% and the second only required a simple majority.

"Stacy Frole, a Cedar Fair spokesman, said the two proposals have different thresholds to pass.

The first proposal, which would alter the company's partnership rules governing the board nominating process, must be passed by 80 percent of the outstanding company shares. That means the proposal will have to get "yes" votes from 44 million of the company's 55 million shares to pass. Any shares that are not voted automatically count as "no" votes.

A second accompanying proposal, which would set up rules for nominating, needs only a simple majority, or 27.5 million votes to pass, but it also requires approval by the board of directors."

http://www.norwalkreflector.com/content/votes-expected-cedar-fair-changes

This whole thing seems silly to me. Instead of all the lawsuits and shareholder votes and such if Q has a legitimate candidate for the board couldn't they have gone to a board member and said "you should consider Jane Johnson for the board. Her qualifications are . . ." Then if Jane really is qualified she could be nominated through the proper channels. Or is there some ethics problem where that would be frowned on.

Well if you believe, as I do, that the Board has been...by and large...wrapped around the finger of Kinzel for the past 20 years then you would be less inclined to go to them for approval of another Board member.

And, while on the surface some of Qs tactics have seemed less than sincere you can't help but admit that there has been some begrudging movement at the top which is a tacit admittance, in my opinion, that things need to change.

Now, the 80% threshhold (and ensuing "no vote" for non returned ballots) seems ridiculous to me. What are the odds that they get an 80% return on any ballot? That is certainly set up so that defeat of proposals is all but certain. Par for the course in today's corporate climate but something that should be looked into more closely.

So, over on the Sandusky Register website a reader claims to have seen the SEC filing regarding the vote.

Apparently, 30% of unitholders did not vote, thus making it impossible to reach the 80% super majority. But, of greater interest is that of the 70% who DID vote...95% of voters voted FOR the change.

Now, the questions must be asked: what percentage of all units held is actually held by Kinzel and the Directors? I know that something like 22% is held by Q and they are the single largest unitholder as I understand it. So, if add up Kinzel and company's percentage what is that? Likely high enough to make them know for a fact that the 80% supermajority was nearly impossible.

The results of the votes are linked on CF's website under Investor Relations -- Financial Information -- SEC Filings -- Form 8-K Submission of Matters to Vote. Percentages reported on Sandusky Register site look to be about right.

One issue with looking at the non-votes is that you really don't know why the holder didn't vote. There was only one way to vote in favor of the proposals: vote yes and return the proxy. To vote against it, you had two options: vote no and return the proxy or just do nothing and it would be counted as a no vote. So maybe thats what folks who didn't vote were doing. Or maybe they didn't get the proxy. Maybe they lost it or forgot about it. Maybe they were just too lazy to fill it out. You can't say with any certainty.

There was a full page ad in The Plain Dealer every Sunday for the past month for this vote.
Wonder what that cost 'Q' besides the constant lawsuits?