From the Sandusky Register…
SANDUSKY
The amusement park industry’s roller coaster ride is on the upswing, an analyst says.
Theme park revenues fell in 2009, but revenues in the industry should rise 1.7 percent in 2010, predicts Nima Samadi, an industry analyst at IBISWorld, a market research company based in Los Angeles.
Samadi said Friday his forecast of an upswing definitely applies to Cedar Fair.
“It’s a company that’s been a real cash flow generator in the past,” he said. “It’s definitely a company that has the potential to remain profitable in the future.”
Samadi said his forecast for an amusement park revival assumes the travel business will get better and the economy will recover.
Stacy Frole, director of investor relations for Cedar Fair, Cedar Point’s parent company, said Cedar Fair also is expecting better days ahead. She pointed to forecasts in the proxy statement the company issued earlier this year.
Cedar Fair reported on Feb. 11 that it had a rough year in 2009, with net revenues of $916.1 million, down from $996.2 million in 2008.
EBITDA — earnings before interest, taxes, depreciation and amortization, the company’s favorite metric — fell 15.7 percent, from $355.9 million to $299.9 million.
Cedar Fair didn’t provide guidance to analysts last year and hasn’t announced plans to do so this year.
But in its definitive proxy statement, filed Feb. 10 to make its case for the sale to Apollo Global Management, Cedar Fair revealed the four-year financial forecast it shared last year with Apollo officials.
The company projected revenues of $966.6 million in 2010, $988.2 million in 2011, $1,012.2 million in 2012 and $1,036 million in 2013. EBITDA also will steadily rise, the company forecast on page 58 of the proxy statement.
Samadi remarked that major amusement park chains have been acquisition targets. He noted that Apollo Global Management is trying to acquire Cedar Fair and that Apollo reportedly also is interested in buying the bankrupt Six Flags chain.
It might make sense for Apollo to buy both amusement park chains and achieve economies of scale by merging the two, Samadi said.
A special meeting to decide whether to approve Apollo’s takeover of Cedar Fair has been rescheduled for April 8.
The Blackstone Group, a private equity company similar to Apollo, bought Busch Entertainment Corp. and Comcast bought NBC Universal.
“Industry players have been a prime private equity target due to the massive amount of debt the industry had acquired over the last decade,” Samadi said.
“Major players have overpaid in the past to acquire regional players and increase their market share. But despite the cyclical downturn in revenue, private equity firms can still reap the benefits from these relatively stable cash producers in the long-term.”
Cedar Fair executives have explained that Apollo’s acquisition with the company will help Cedar Fair deal with about $1.6 billion of debt. Cedar Fair acquired much of that debt in 2006, when the company bought the Paramount theme parks chain.
To read the public spanking Cedar Fair management got at the hands of the New York Times check this out:
http://dealbook.blogs.nytimes.com/2010/03/22/the-price-of-goofs-in-deal-making/
This is a most embarrassing public repudiation of Cedar Fair actions by a respected journalist and expert on mergers.
Note the professors comments in reference to Q Investments statement about not being cut out of the upside of the deal. The professor notes, correctly, Q Investments language suggests they may go along with the merger if they are cut into the equity of the new company.
This action would really take the retail investors to the cleaners. Everyone would win, except the large number of individual investors. This action, should it occur, would resemble, in my mind, Greenmail.
Greenmail is an illegal activity. It is when one large investor gets preferential treatment, usually a higher price for their shares, than other shareholders. Giving a party selective access to the upside of the deal whilst depriving other parties that opportunity is suspect.
And this is the heart of the problem with the sweetheart deal Cedar Fair Management and Board have hammered out in the proposed merger with Apollo: management and the board get to participate in the upside of the deal without suffering any downside.
They are shifting all the downside risk (read “costs”) to the Unitholders while feathering their nests with all the upside potential and thus avoiding downside costs.
It is a case of “heads I win, tails you loose.”
Cedar Fair reports season pass sales up 30% at Carowinds. They also report expected strong increases in park daily attendance.
Will the Cedar Fair Apollo proposed merger complete?
It is difficult to say if the deal will consummate.
Much depends upon the actions of the two big funds which hold approximately 27% of the shares. If they push for inclusion, via equity in the new Apollo controlled entity, it is possible they could garner the votes for it to pass.
But then, again, Apollo could fail. For those who still doubt savvy money thinks this is a stinker of a deal for Unitholders–look at the position the Knott family has taken.
The Knott family is on record as opposing the deal. These are folks adept at financing and running large resort parks. If they feel it is a bad deal for them, you can count on it being a bad deal for you.
The Knott family controls more than 3% of the Cedar Fair Units.
Given the small Unitholders disgust towards management, I think this deal may very well be scuttled by a “no” vote.
No voting will not be enough. Unitholders must then take strong action to rescue CF from the entrenched management and board.
For CF to prosper Kinzel must be sent packing. It is likely CF would not be in the position it finds itself in today had Kinzel retired, AS WAS PROMISED, shortly after the Paramount Parks acquisition.
What CF needed then, and desperately needs now, is a forward looking CEO and Management Team. The “accounts mentality” must be swept from the executive offices.
Unitholders and the company need leadership on pricing, product, and promotion. Leadership which has been absent under the likes of a past-his-prime and past-his-retirement-date Kinzel.
You can bet Apollo is planning for just such a redirection of the actions in the executive offices.
For Unitholders to be rewarded they must maintain control of the company and make the necessary changes in the executive suite.
Given the prospects for a strong operating season ahead–now is the wrong time to conduct a fire sale of the company.